5 Reasons To Invest In Apartments!

Investing in apartment buildings is one of the best investments you can make with your money – better than the stock market or even single family rental property. Apartment building investing is not a get-rich-quick scheme, but it is the best way to build long-term wealth. In this month’s Harbor Drive Investor we’re going to talk a bit about our top 5 reasons we love apartment investing so much!

WATCH: In the video and comments here below, HDH co-founder Rob Overstreet talks a bit more about several reasons we love apartment investing!

REASON # 1: APARTMENT BUILDINGS ARE EASY TO FINANCE

Compared to any other business, commercial real estate is the least challenging business to get financing for. Banks prefer the security of real estate. Everyone understands and trusts real estate, so it is easier to raise money for real estate investments than any other business. Apartment buildings are even easier to finance because they offer less risk than single family rental properties or other commercial asset classes. This is because the more units you have the more the risk of unpaid rent is spread out (this is also why you should invest in as many units as you are comfortable with).

REASON # 2: INVESTING IN APARTMENTS IS LESS RISKY

As a commercial real estate investor, you always try to balance risk vs. reward. Investing in apartment complexes can yield good returns at a relatively low levels of risk. Why else would banks so readily finance apartment building purchases? Because commercial property presents a justifiably low level of risk to them.

REASON # 3: APARTMENT BUILDINGS PRODUCE PASSIVE INCOME

We all want passive income, right? But what business can reliably produce good returns without requiring your full-time involvement? Apartment buildings are one of the few businesses you can set up to produce passive income. Using a professional property manager frees up your time and ensures the building is managed properly. Once an apartment building is stable and the property manager is performing, your involvement in the investment can be nominal, allowing you to spend your time with your family and finding more deals.

REASON # 4: YOU CONTROL THE VALUE

Apartment Building investments aren’t as closely dependent on the market (unlike single family homes whereby the value of your property is based on what your neighbor sold his/her home for). That’s not to say that there are not market forces involved with apartment valuations, but it makes makes apartment values more predictable, stable and more easily understood by banks and other investors. As an apartment investor, you have much more control over the value of the property: maximizing rents and minimizing expenses will increase the net operating income, and that will increase the value of the building.

REASON # 5: APARTMENTS OFFER THREE WAYS TO MAKE MONEY

One of the best aspects of owning multifamily real estate is that you have three ways to make money:

Cash flow: apartment complexes commonly produce steady cash flow.

Amortization: your tenants are paying down your mortgage for you – isn’t that great? This can really add up after several years.

Appreciation: controlling costs and increasing rents will increase your operating income and with it, the value of the property when you sell.

When you combine cash flow, amortization, and appreciation, the total return of an average multi-unit property investment is impressive, especially after 5-10 years or longer. Combine this with reasons # 1 – # 4, and apartment buildings are nearly impossible to beat as an investment.

Apartment buildings, and commercial real estate in general, give you a unique mix of high return, low risk and passive income which make it the best long-term investment in the world!

P.S. We haven’t even written here about some of the amazing tax benefits that real estate investors can benefit from which is possibly even more exciting than the five reasons to invest listed here above (I know, I used the terms ‘tax’ and ‘exciting’ in the same sentence, but believe me, this is a very powerful way you can grow and preserve your wealth and cash-flow)! We’ll write about the amazing tax benefits in a future Harbor Drive Investor!