The Hidden Advantages of Owning Apartment Houses vs Single Family Houses
One of the first money making reasons to hold apartment houses and not single family houses is because there is loads of cash flow to be made in apartment investing. Apartments are always in demand – no matter the economy – so if cash flow is important to you then will generate it quickly. When you invest in apartments, your income has no cap. It’s solely based on your expectations and actions.
You can invest in apartment houses part time and eventually quit your job and live better. Serious apartment house investors spend their time finding more profitable deals. Once those deal are found and closed, they employ experienced property management companies who will carry out the day to day activities associated with maintaining an effective business. The purpose of the management company is to free the owner of the apartment building so he or she will have time to do the leisure activities that they enjoy most.
There is less competition in apartment investing verses single family home investing. Only a few investors know how to do it right, and are willing to talk about it. There is little written on the subject of apartment investing and those who do know want to keep it a secret.
There is a lot less risk when buying an apartment building. You don’t lose all of your cash flow if you lose a tenant, as you would with a single family home. Consider this – you can cut your risks by 2 with a duplex and by 4 with a quadplex. So imagine if you have more units under one roof, it will become even easier to absorb tenant turnover.
Apartment investing provides you the benefit of tax-deferred money. Your profits can be tax free (or at least tax deferred) though refinancing. This principle is called 1031 tax-deferred exchange. Performing a 1031 tax deferred exchange basically allows you to defer capital gains taxes on real estate bought and sold for investment purposes.
Economies of scale are realized when investing in apartments. Owning six units in one apartment building is better than owning six single family homes. The cost to maintain them is a lot less. Most importantly, other people pay your mortgage and expenses.
Apartments provide you with a fast price rise in an “up” market cycle and lower price fall in a “down” market cycle. Real estate markets are cyclical meaning it has cycles and phases. Each cycle is different and it depends on the economic environments. Knowing how to buy apartment buildings in each market cycle can lead to tremendous gains as well as avoid long term loss.
Apartment home investing is a ground-floor investing opportunity. Not many people are investing in apartment houses. It’s is a great time to invest in apartments because the economies of affordability of single family housing forces many to rent. The greatest demand for apartment homes is being created by the Baby Boomers children, who are called the Echo Boomers. In addition, lifestyle changes and elderly preferences are swelling the ranks of renters.