There’s one asset you should buy that’s going to generate the most cash flow and passive income on your investments. When you invest capital in this type of asset, it’s going to generate one of the most reliable returns you can generate.
We’ve been investing into multifamily real estate for several years and we’ve built a portfolio worth over $80 million. It’s all built on this one type of asset class.
What Asset Should I Buy?
It’s not single family housing or condos, it’s not manufactured housing, commercial, or industrial properties. It’s actually multifamily real estate. And multifamily real estate is the process of purchasing apartment units and townhouses that you can rent out and generate a return on investment. We’ve been investing into multifamily real estate for many years now. Our portfolios have grown to more than $80 million of assets under management. It’s all predicated on investing into multifamily real estate. It’s one of the most consistent and reliable assets you can invest in.
The Asset During The Pandemic
Even during the pandemic it was an asset class that really performed with very little interruption. There were still a lot of collections and rents being paid. There was a fraction of people that didn’t pay their rent, but there still was a high percentage of people who did. If you’re invested into locations that have good high quality tenants, then you’re in good shape investing into real estate.
But the people who suffered the most investing into real estate during the pandemic were people who invested into locations that were less desirable and rents were lower. Maybe your rents were in the $500 to $800 a month range. If you have properties that had rents from around $1000 all the way up to $1800 or $2000 a month, then your rents were always being paid on time with a small percentage of delinquencies. That’s why multifamily real estate is a really great asset that you want to put your capital into. This is what’s going to allow you to multiply your equity. If you buy your assets correctly at the right price, then you’re going to perform really well investing into multifamily real estate.
Why Multifamily Real Estate?
Multifamily real estate has cash flow. It’s scalable and it also has the ability to appreciate rapidly when you purchase a property and force the appreciation. You can do this by implementing value adds at your property and improving the units by putting in new countertops and kitchens. All those improvements into the property are going to force appreciation. You’ll be able to increase the rents, which allows you to increase the value. The value of your property is all predicated on the pricing of your rent. You can raise your rents by $200 or $300 per month and you turn over each unit and raise the rental price of every tenant. Then the value of your property is going to increase substantially. That’s the name of the game with multifamily real estate.
The Benefits of Passive Income
Passive income is one of the biggest benefits of owning multifamily real estate. Your property will generate a substantial amount of passive income if you have 50 to 100 units full or leased. As long as you have 95% of your units rented, you’ll have strong cash flow at the property
Be sure to subtract expenses, such as your management, repairs, maintenance, turnover cost, property taxes and insurance. Once you subtract those expenses, you’ll have a really strong cash flow. That is as long as you’re charging the right rents at your property. This cash flow is indestructible because it’s going to be reliable, consistent and long term. As long as you have good property management on site, you can really have the property performing at a high level, and it’s going to make you a lot of money.
Benefit to Multifamily Real Estate
Another huge benefit to multifamily real estate is that it’s very scalable.
You can purchase multiple properties and it’s not predicated by how much time you’re spending at a specific property. Unlike a job where you have to show up every day, multifamily real estate doesn’t require your time to be spent to operate and own the property
All you have to do is find deals and acquire them. Then you can have people manage the property or you can manage the property yourself.
There’s no limit on the number of properties that you can purchase. That’s why multifamily real estate is such a good investment because you can scale it to levels that are unbelievable. There’s no ceiling to how many properties you can acquire in your portfolio.
Property Management v. Third Party Management
Multifamily real estate doesn’t require you to manage the property all by yourself. You can hire third party management. This is going to give you the depth of experience by working with someone else who has the experience to carry out all the tasks of management at your property.
Greatest Strength To Your Team
One of the greatest strengths you can add to your team is a property manager. If you don’t use a third party manager you can manage the property by yourself and start to build your own team internally. You have to figure out which route you want to take and what your priorities are. Third parties can manage your properties in the beginning. And once you acquire more and more properties, then you can build out your own team. You can go either way. It depends on what your preferences are. Sometimes the easiest way is to acquire properties and manage them yourself in the beginning.
You’re going to increase your cash flow because you’ll be paying yourself to manage the property. Then as you get bigger you’ll be able to add employees and build a team to help you manage the property. That’s going to be the best way to scale and it’s going to give you more money. If you can manage the property and bring on skilled people who can manage the maintenance aspect, then it’s going to make you more money. Another route is third party managers. But, you’re going to have to pay anywhere from 5%-10% on your gross scheduled income to compensate them. Therefore, if you want to generate a lot of money, then it’s best to manage your property yourself.
Apartment investing is one of the least riskiest assets to purchase compared to commercial or single family or any other type of asset within the real estate market. If you can buy a bunch of units all in one location and you can fill all of these units and keep your vacancy percentages at a minimum, then you’re going to have a strong asset that’s going to be reliable, predictable and consistent with the money coming in and the cash flow. So anytime you can do that and purchase those types of assets, it’s going to be the least riskiest asset you can purchase.
Additionally, the smaller the deal you find, the riskier it will be because it’s harder to manage. You have to replace roofs on a smaller number of units and it just becomes less efficient. Over time, compared to if you’re buying bigger properties and bigger projects, they may be a little bit harder to acquire at first but they’re going to make you the most money and they’re going to generate the most profits. Those are the types of deals you should focus on and look for.
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