One word: cash flow! That’s only one of the key reasons that you want to invest in multi-family properties. We’re going to discuss all of them on today’s show, and explain to you exactly what can make these a great investment opportunity! Get ready to learn the six absolutely critical points that you need to know before you invest in multi-family – and why you need to have a firm handle on all of these before you put money in!
1. Cash flow. Apartments generate monthly income, what we like to refer to as ‘steaks in the freezer’. Some people call this ‘walking around money’… it comes in even if you SLEEP in…
2. Control. You have the ability to control every decision that affects your investment. How much is rent, who is managing, etc.
3. Tax advantages. It’s not what you make, it’s what you keep that’s important, and real estate offers tremendous tax benefits. Why would the government create advantages for this tax class? The government realizes it does not have the ability to deliver affordable housing, and by offering these benefits, it is trying to stimulate the private sector to step in and fill the void.
4. Economy of scale. This is a huge advantage when trying to scale your business. It can be easier trying to collect rent from 30 tenants in one apartment building than running all across town to collect from a bunch of single family homes. It is easier and more cost effective to have more units under one roof with one management structure.
5. Ability to force the appreciation. The value is not as reliant on comps as it is your ability to increase the value through growing the NOI. Net operating income (NOI) is a calculation used to analyze real estate investments that generate income.Net operating income equals all revenue from the property minus all reasonably necessary operating expenses.
6. Velocity of money. This refers to the ability to refinance a property, withdraw the equity, maintain control of the asset, and invest the refinance proceeds into another property. Banks are the ideal example of “velocitizing” money. They borrow funds from their customers and lend the proceeds out to individuals looking for loans. The faster the money moves, the wealthier you become.