Investing in Apartments Can Change Your Life!

In my opinion, multifamily real estate (apartment investing) is one of the best ways to grow your wealth. So much so, that my wife and I decided to sell our primary residence a few years ago and put 100% of that equity into apartments, along with the majority of our investment portfolios. 

For those of you who are "in the biz" you know a primary residence (your home) is not an investment, because it doesn’t pay you each month — you have to pay for it (unless you house hack, which is another topic, I'll cover very soon). 

Your house is a liability, not an asset (Thank you Robert Kiyosaki). Not only does a house leave you less mobile, it ties up your money so you can’t use it for investments. The more you pay down your home, the more you're trapping yourself and your investable cash. 

Here are a few thoughts on multi-family real estate as we look forward: 

• 75 million+ Baby Boomers are retiring
• Many of today’s apartment complexes can be converted to retirement communities
• A large number of millennials aren’t buying homes
• It’s expensive to build new apartment buildings

Multi-family investing is the easiest way to build wealth, once you’re in the game!

HOW WE INVEST

My wife and I partner with experienced teams and invest in what's called real estate "syndications" which means we, along with other investors, "pool" our money together to purchase large assets, like a 300-unit apartment complex for example. The general partner (or managing partners) and their team will "add value" to each property by renovating the units, adding modern appliances, granite countertops, in-wall usb ports, smart thermostats, storage lockers, improved landscaping, clubhouse, gym, pool, parking lots etc (depending on what the property is lacking) with the overall goal of "modernizing" the asset to today's demands and standards and therefore increasing the rents to "market level".

The value or "price" of an apartment complex is primarily derived from the NOI (net operating income), which is the total collected rents and income minus expenses to operate the property. When the net operating income increases, the value of the complex increases at a multiplier of this number. For example, let's say you increase the annual net operating income on a property by $100,000 a year and a property in that market sells around a 10x multiple of the NOI. A $100,000 rent increase can bump the purchase price up by approximately one million dollars!

EXAMPLE

A 300-unit apartment building. Rents increased by $28 a month, per unit x 300 units ($28 x 300 = $8,400 monthly x 12 months = $100,800). For resale purposes, these $28 rent increases implemented across the board, resulted in the property value increasing by about one million dollars. This type of value-add cannot be done with a home, period.

For the vast majority of people, college doesn't lead to riches, nor does buying a home. If your goal is to build up $200-300k of equity over 30 years, then buying a home is a good place to park your money in the same way you would with a savings account or a CD. 

If you invest in multi-family real estate the right way, over the next decade it could be the best investment strategy of your lifetime — and I'm speaking from experience. My wife and I have partnered with more than 14 syndication groups in over 25 deals which equate to just over 6,000 apartment units and the cash flow from these investments provides us what we refer to as "Time Freedom", which we define as "the ability to do what you want, when you want, as much as you want, with your time. At the end of the day, we all deserve to have more time, more freedom and the ability to focus on what we love and enjoy. 

If you want to get involved in multi-family real estate, reach out anytime. I'd be happy to share my experience and point you in the right direction. 

To your success,

Travis Watts