Building wealth by investing in Multifamily properties

"...Multifamily properties are for cash-flow and single family is for appreciation and wealth building ..."

I've seen this statement and variations of it everywhere. So is it really the case?

Does investing in Multifamily properties really limited to cash-flow generating?

Aside from the fact that cash-flow is an AWESOME outcome of investing in multifamily real estate I would argue that there are many ways to build wealth in multifamily.

First let's understand how multifamily properties are valued:

Value = NOI / Cap Rate

So To get the value you take the property NOI and divide it by the cap rate. 

Since the cap rate is set by the market in your immediate area and fluctuate over time the only way you can increase the value and build equity (wealth) is by increasing your multifamily property's NOI

There are multiple ways to increase your NOI, also known in the multifamily industry as "force appreciation". 

Simply put, you can either increase your income or reduce your expenses.

In the next few blog posts I will explore different technics to increase your NOI.

Stay tuned...