Lower Risk than Single Homes or Lower-Unit Apartments.

If a tenant moves out of a 100-unit apartment building it’s not a big deal since you have income from the other tenants still coming in, whereas if a tenant moves out of a single-family home you lose 100% of its income, where a duplex loses 50% and so on. The more units you have the more insulated you become, and the less tenant turnover affects you.

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Apartments are Rare

There is a lot of money out there hunting for high return investments. Apartment buildings are rare, and “big money” billion-dollar institutional companies are chasing these very same assets as we are, which drives prices even further. Commercial real estate brokers say that a solid apartment deal could have hundreds if not thousands of interested buyers, which is why these deals are typically private and not posted on an MLS type of system.

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Increasing in Demand

Demand for apartments is at an all-time high as there is a limited supply of lower income housing. There are simply not enough homes to support our growing population, and that’s going to continue to add more pressure to real estate prices going up in the future. With the rise of home prices and interest rates, it’s becoming more difficult to own a home than ever. Low vacancy rates equal greater cash flow as well as equity growth, which translates to higher returns for our investors.

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Economies of Scale

Operating a 100-unit multifamily apartment is less expensive than operating 100 single family rentals. One roof, one heating system, one yard to maintain, all in one location. Property management companies may charge 10% to manage a single-family home, whereas in a 100+ unit, they charge a bulk-discount of around 3%.  This drives returns, provides excellent service, and promotes a strong community in one location. 

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More Predictable, Income-Based Valuations

Apartment building values are based on income; not neighboring sales like in single-family housing. You can predict what you can sell for, as values are based on an apartment’s NOI (Rental Income minus Operating Expenses = Net Operating Income). We focus on forced appreciation through renovations. For every $1 we increase income or decrease expenses, we force the value of the apartment building up by $20. If we raise rent in a 100-unit apartment building by $100 per unit, it will add $10,000 – $120,000 per year additional rental income, increasing the value of the building by $2.4 million dollars ($120,000 x 5% CAP Rate = $2.4 Million value). That’s huge! This also increases your net worth as an investor. 

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Cashflow and High Return on Investment

In Florida we buy properties that will return 5-7% cashflow distributions on a monthly or quarterly basis  to our investors, plus a large payment once we renovate and sell the apartment building. So for example, if an investor partner invests $500,000 on a deal, they would receive approximately $25,000-$35,000 annually until we sell the property. At that point they would receive their original investment of $500,000 back, plus their share of the profits from the sale of the building, typically 10-13% of the original investment, so another $50,000-$65,000.

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Natural appreciation

Real estate prices have steadily increased over the years, especially in this inflationary market.

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Income Generating Physical Asset

Apartments give you more control of the investment. Your investment is backed by an income generating asset, so not only do you benefit from the asset going up in value you are also receiving cashflow, even in a struggling market. Real estate is also a great Inflation hedge. There are trillions of dollars being printed into the money supply, making each dollar worth less every day. Buying physical assets has always been the best way to protect wealth in an inflationary market. 

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Leverage

With Real Estate you can also leverage an asset that’s 5x greater than your investment by getting a mortgage through a bank. With 20% down payment and 80% mortgage, a property that goes up 5% in market value, will get you a 25% return on your invested money. That’s the power of leverage!

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Tax incentives

You can depreciate buildings which helps to minimize your taxes.

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Proven vehicle

Andrew Carnegie was the richest man in the world in the 1800’s, he famously said that 90% of the world’s millionaires used real estate to build their wealth, and that still holds true today. If you look at your own net worth, there’s a high probability that a good portion of it is currently in real estate. If that is true for you, then why not do more of what’s already working for you, right?

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For Canadians: U.S. Diversification

Purchasing apartments in Florida allow you to diversify your investments benefiting from the US dollar, which is the world’s reserve currency. The distributions you receive are in US dollars, so when you go visit the US you don’t have to pay high fees for the exchange. By the way, we get our Canadian investor partners access to exchange CAD to USD exchange rates at 0.25%, whereas the big banks take 1.25% or higher on exchanges but blend it into the rate they quote so you don’t see it.

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