In a recent newspaper article, Ken Rogoff warns against being complacent about inflation. It is not a theoretical curiosity, he says, but a very real threat. As anyone over 50 knows too well, once unleashed, inflation can debilitate economies and reduce to a pittance the net worth of anyone not holding hard assets.
The hard assets that can protect you once the inflation tiger is out, are precious metals, and real estate. Precious metals, like gold and silver, require you to have and invest liquid cash to become their owner. Income producing real estate on the other hand, like apartment buildings, don’t.
Apartment buildings produce income, so they are easily financeable. In fact, you can buy an apartment building, of any size, without using a penny of your own money. And the value of an apartment building adjusts with inflation, so once you own it, your net worth (the equity in the property) increases with inflation.
Everyone needs a place to live, and when the buying power of the dollar is compounding downwards, it’s better to be the owner of an apartment building, than a renter.
The smartest play for today, and the coming decade, is to learn multifamily investing, and then “practise” what you learn. When you target the right property, a single building can liberate you from you day job, and position you for financial survival in the coming uncertain economic times.
Can you “really” buy an apartment building using none of your own money?
The answer is absolutely “yes”. It is done is every city across the country every single day. The key is, having a deal with upside (profit that can be created) that will attract investor/partners.
Not every deal is a candidate, and having the ability to find deals that fit specific profit criteria is very important. Obviously anyone can buy whatever class of property they like, but the most attractive property for investors, and banks, are Class C properties.
Class C apartment buildings are 30-40 years old, they may have been rehabbed once but they are starting to look shabby again and the technology in the building and the individual units is starting to become obsolete. All of these elements, plus management burnout, leading to high vacancies, results in Class C properties being able to be bought for a fraction of their After Repaired Stabilized Value.
After repairs have been made and the property is fully lease at market rents, it now throws off a lot of cashflow. Because the end game of a Class C turnaround results in a lot of cashflow, everyone gets paid. Banks get paid; there is a nice, fat debt coverage ratio that makes them very happy. Your investors get paid. No longer are they facing the oblivion of 0.1% CD rates. They are now earning 6-10% on their savings, and they have a future.
And you get paid. Most importantly, there is plenty of cashflow for you at the end of each month, compensating you for all your hard work, and the opportunity you have created for others.
Thanks to all these factors raising money for your apartment project is not a hard sell. You need to lay out all the facts, yes. But that’s the good part, because the opportunity sells itself. All of the facts surrounding Class C apartment turnarounds make for a compelling investment case, whether you are wholesaling for quick cash, or buying to hold for cashflow and long term appreciation.
Get started learning multifamily investing today; you and your family’s financial well being may depend on it. Even if you are a beginning real estate investor, the time to start is now. Yes, there is a bit to learn, but no aspect of apartment investing is so elusive that you can’t understand it, and with a bit of practice, and courage, master it.
You can buy an apartment building using none of your own money today, and secure your family’s future.