Seven Benefits Of Multi-Family Investing

Positive Cash Flow

We focus on positive cash flow to create:

  • A self-sustaining business without additional cash injections from the owners.
  • Return cash to our investors (quarterly).
  • Funding to properly maintain the property quickly and cost-effectively.
  • Create a valuable income producing asset that will be attractive to any investor when we sell.
  • Apartments are the original subscription business model leading to recurring revenue.

Forced Equity

Realized from increased income and decreased expenses.

  • Increased rents from:
  • Repositioning the property
  • Interior/Exterior renovations
  • Addressing deferred maintenance
  • Adding more units
  • Decreasing vacancy

Decreased expenses from:

  • Better management of tenants
  • Interior/Exterior renovations
  • Eliminating or passing on shared utility expenses

Control

  • Investing in local apartments as a passive investor affords more control over your assets.
  • Allowing the investor to speak directly to the asset manager and general partner that you would never get investing in stocks and mutual funds.

Principal Paydown

  • Your tenants are paying your mortgage.
  • Every month your equity position in the property increases with no effort on your part.
  • This is Passive Investing.

Tax Benefits Of Depreciation

  • The depreciation of the building will often exceed your cash flow, allowing for tax-free income.
  • Cost Segregation and Bonus Depreciation accelerates your writes offs from the rental income produced.

Property Appreciation As A Hedge Against Inflation

Did you know? The Fed wants 2% Inflation?

  • Real Estate Values have appreciated annually by 3.7% (1968-2009 residential properties)
  • An annual 8% return in the stock market is actually a 6% return when accounting for inflation.
  • Rents are easily adjusted to keep pace with annual increases in expenses.

The Benefits Of Leverage with a Conservative Approach

  • Assume a $1 million property with 30% down that would be $300,000.
  • Assume 2% appreciation on the $1 million value that is $20,000.
  • That is a 6.67% return on the investment.

What do we think is a conservative approach?

  • Banks are normally willing to lend with a LTV ((loan to value) of 70-80%.
  • Banks also will expect a debt service coverage of at least 1.25 or higher.