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Why Invest in Apartment Buildings?
Many investors have found that investing in apartment buildings is a great choice because of the huge demand and the low risk. More>>

Why Invest in Apartment Buildings?

That’s a great question. Why should you in invest in apartments?

For me, I have a couple of answers. One, I enjoy it. I really do. Two, it provides a means to an end for me and my purpose in life. See, I would like to start schools in the inner city for at-risk kids, beginning in grade school and tracking them to and through college. And investing in real estate, apartments in particular, allows the financing of that dream to come true.

But what about you? What made you pick up this book? What’s going on in your life that makes you want to invest precious resources (your time, money, and relationships) in apartments?

Are you fed up with your 9 to 5 job? Have you reached a ceiling in your field?

Are you getting older and older and forgot about planning for retirement?

Is their something pressing in your heart that you want to do in life, but your J.O.B. keeps getting in the way? And you need to be free from it?

Do you have this burning desire to create a better, more fulfilling life for yourself? For your family?

Or do you desire to positively impact the lives of many people by providing a safe, clean, and warm place for them to live while getting paid handsome sums of money for doing so?

So, why invest in apartments? My reason is financial freedom which leads to other things. What’s yours? Here are eight reasons off the top of my head. I’m sure you could generate a lot more if you sat down and thought about it. Which one is most compelling and makes the most sense to you?

#1: Everyone always needs a place to live.
Your product, apartments, will always have a demand for. With foreclosures happening everywhere along with the sub-prime mortgage fiasco, there are fewer and fewer people able to buy into a new home. They instead, move into one of your apartments for the time being. Rentals in the next ten years will be propelled by growing numbers of echo-boomers, those aged 18-34, essentially the children of the baby-boom generation as well as immigrants coming to the U.S. This age group will grow on a national basis from 65.8 million in 1995 to 72.9 million by 2020, an increase of seven million renters, according to researcher J. Thomas Black.

#2: Apartments have the ability to produce passive income or monthly cash flow.
Or you can refinance the building and pull out cash tax-free. The goal here is to create enough cash flow to exceed your personal monthly expenses. It will take some effort and risk to get there, but how much do you value financial freedom? Try doing that with a mutual fund!

#3: You can force the appreciation.
Most apartments can raise their rents once per year. As rents are raised, the value of the building goes upward as the net income goes upward. The second comes by way of your tenants paying your mortgage over your years of ownership. In most loans spread out (amortized) over 25-30 years, as each payments is made, the loan amounts decreases – and your equity goes up. Of course, I can’t stress enough that you keep your apartments looking spiffy and in a good location.

#4: Apartments are good hedges against economic volatility.
If the real estate market downturns, you can lower rents to keep your building full. When the economy upturns, you can raise your rents and ride the wave to higher cash flows.

#5: They make very good tax shelters.
Name another investment where you can pocket thousands of dollars annually and write off depreciation, mortgage interest, and capital expenses, and pay no taxes at year-end.

#6: Apartment investments are inflation-fighters.
Rental rates tend to move up with construction cost increases. And rental leases are usually adjusted upward every year as opposed to other commercial real estate that adjusts once every 3 to 10 years - maybe.

#7: Leverage and velocity, my two favorite words.
Would you rather own 50 homes or a 50 unit apartment building? With 50 homes, you’ll need to obtain 50 loans, 50 appraisals, 50 closings, take care of 50 roofs, mow 50 lawns, get the picture? With 50 units, you’ll have one loan, one appraisal, one closing, one roof, and one lawn to deal with. Which do you think would easier and quicker to sell? 50 homes or one 50 unit building? From the management point of view, is it more efficient to manage 50 separate homes or 50 homes under one roof?

#8: No day-to-day management on your part.
Wouldn’t it be great if you could reap all the benefits of ownership (cash flow, appreciation, and tax advantages) without having to do any work? Well, if you hire a good manager or management company, that’s what happens. One word of caution: watch your property manager like a hawk because no one cares more about your investment than you do.