Have you ever thought about apartment investing – or how to buy an apartment building? You can get started investing in apartments – even if this is your first real estate investment.
The first thing I want to cover is this: it is a complete lie that you have to invest in houses first, and then “graduate” to apartment buildings. This is absolutely false. You can get started investing in apartment properties from the beginning – with no “prerequisites.”
Top 4 Reasons to Buy an Apartment Building:
1) Cash Flow
You will receive cash flow in the form of rents while you own the building, as well as your biggest cash flow of all – when you sell.
An apartment building can appreciate both organically (over time) as well as through sound property management.
3) Principal Reduction
Your tenants pay down your mortgage balance every single month, building your wealth a little at a time.
4) Tax Benefits
Buying an apartment building can provide tax benefits through depreciation deductions, as well as being able to defer your capital gains when you sell. Try selling a stock and not paying capital gains tax!
3 Steps to Buy an Apartment Building:
Invest in yourself first and start with your education. Purchase some books and educational materials specifically geared to help you get started investing in apartment buildings. Take the time to get through some of these materials before you get started.
2) Passive or Active Investor
The next step is to decide whether you want to be an active investor, or a passive investor. Here is what I mean:
An Active Investor is “hands on” and involved with the day-to-day management of their properties.
A Passive Investor outsources the day-to-day maintenance and management activities.
There is no right or wrong answer here. I have seen investors become successful using both methods – just be true to yourself and the time commitment you have available.
3) Identify Your Investment Goals
Dream big, but be realistic. What do you realistically want your finances to look like in the next 12, 24, 36, and 60 months? How much cash flow? How much net worth?
Every investor has different life circumstances and goals. Make your goals personal to you.
4) Get Started
Take action, and start small. Once you have invested a little into your education and established some of your goals, it is time to take action. Don’t make the mistake of getting stuck on an endless cycle of education because your education never ends. Get started with some smaller deals first, and then move your way up. It can happen a lot faster than you think, but it all starts with your first property.
5) Keep Going
Once you get started, keep going. It is very difficult to become financially free from your first property. Maybe impossible. Do not look for the “one property” that is a home run. Great wealth can be built over time with a variety of properties working together to build your income and net worth.
Reason #2. Predictability
I have often hear, and repeated the statement that, “People will always need a roof over their heads.” This is more true today than ever.
When the economy is bad, more people look to rent, rather than buy their own homes. In fact, as I write this, we are experiencing a large shift from an ownership society to a rental society. This is happening for several reasons:
– Economic uncertainty
– Flexibility to move
– Lack of available credit to purchase a home
– Lack of affordable housing
Apartment investors provide a valuable service to our residents because they need a safe, clean, affordable place to live.
Reason #3. Control
There are several forms of control that I like about apartment buildings:
1) Invest how you want.
You can invest on your own, through a partnership, or in a group investment. You are able to decide the type of properties you invest in, and their locations.
2) Invest when you want.
You are not bound by any terms and conditions of a regular stock or mutual fund trading account. You can choose when to buy, and what to buy.
3) Outsource the day-to-day management.
An apartment building is one investment where you can have everything managed for you from the beginning – without having to reinvent the wheel. This activity is easily outsourced.
4) Ability to increase your property value.
This is probably the #1 reason to buy apartment buildings. This is because with an apartment property, you actually control the property value. You do this by increasing the Net Operating Income of the property. A building that produces more cash flow is simply worth more money because of the returns to the investor.