Buy Apartments To Build A Retirement Nest Egg
By Bob Diamond
The New York Times and Wall Street Journal reported that apartment buildings are a great investment. They further reported that people who want to ensure their retirement are using apartment buildings as a way to save for their retirement because they provide high yields at moderate or low risk given the current housing crisis.
The New York Times and Wall Street Journal are correct! Apartment buildings do provide low risk and high returns relative to other investments.
Return on Investment
Lets first look at average returns earned when investing in apartments or similar types of income properties:
The true return from an apartment building once the appreciation is considered is more likely to be 10% or more.
As much as we like the mathematical returns, there is a practical strategy that investors are using to ensure they enjoy cash flow during their retirement.
They buy a building that can be paid off by retirement, and then they use the rents as a retirement income. Let me give you an example:
We will pay the building off approximately fifteen years from now. At that time the building will have inflation adjusted rents and expenses that will be similar to what we have today. The means our cash flow will increase to $39,908 per year! All from our initial $30,000 investment!
I like apartment buildings as an investment. They are easy to find, easy to analyze, everyone needs a place to live, banks love to lend on them, and they're great cash flow generators, especially now that prices and interest rates are down! In fact right now FNMA is offering 5.5% loans on apartment buildings!
For a new investor they are easy to analyze, manage, and easy to relate to. For an experienced investor they are straightforward to manage and you can set up business systems to automate and delegate the mundane day-to-day tasks of owning apartment buildings. Once one is started it is relatively simple to buy more and more apartment units and become a rich apartment building mogul.
When & How to Buy Your First Apartment
Now is a great time to start. There are lots of great deals on apartment buildings because properties are being bought on cash flow today based on current rents and occupancy - not on artificially high prices based upon hope of future appreciation or condo conversion. Buying at today's low prices gives you positive cash flow from day one. That makes is a smart investment.
Our advice to my new investor was to start off investing in small to medium-sized multi-unit properties (5 to 12 units) then work your way up to larger properties as he gained experience and a strong management team.
Go forth and Prosper.