3 REASONS YOU WILL BE GLAD YOU INVESTED IN APARTMENTS
If you are like me, ten years from now, you will be glad you took a good look at apartment investing. You might even have a big smile on your face because you decided to invest.
I have been investing for over 50 years. For decades I limited my investments to mutual funds and a few individual stocks.
The STOCK MARKET has done very well in the past couple of years. If, like me, you have traditional stock and mutual fund investments, you are likely quite pleased. If you have been around for a while, like me, you realize the market makes corrections from time to time, as well. These can be pretty scary rides.
I have tended to be a growth stock investor, which means I wasn’t after dividends or income from these investments. But, in recent years I have become more interested in passive income, steady income.
And then I discovered real estate as an investment.
Real estate has a number of advantages over more traditional asset classes. We have spoken about some of these in previous blogs. CLICK HERE for a link to a post listing 5 reasons why real estate is an ideal investment.
I currently hold a small portfolio of single family rentals which provide good cash flow and several tax benefits among other qualities.
The price of single-family homes has risen quite a bit over the past year. My SINGLE- FAMILY RENTAL PROPERTIES have both risen in value and I have been able to raise rents as well. Some of us also remember the housing crash of 2007-8 when values dropped precipitously. That was a bit scary, wasn’t it.
I like my small single-family portfolio. They have grown in value. They do produce steady income. And I have chosen to have a property manager handle the day to day operations, so it is pretty passive. But, I realized how challenging it would be to scale.
About five years ago, I began to explore multi-family or apartment complexes as an investment. Three of us put together a partnership with some other investors and purchased a 129 unit complex.
Adding apartments to my investment portfolio is doing many things for me and the others in the partnership. I note three below.
One of the reasons I really do like apartment investing in multi-family properties is their long history of stability. Is stability important to you?
I did a lot of research on the performance of multi-family as an asset class over the past 30-50 years. What I found is how stable the values have been. Unlike the retail home market, the price of properties has not precipitously risen or fallen over the past decades.
When you or I invest in an apartment complex, we are investing in a business. The value is based on the net operating income the property produces. If you study apartment rents you recognize that they have risen a little at a time. This gives your income stream protection against inflation.
Also, the demand for rental apartments has remained strong for decades. In a previous blog, we noted the steady and even growing demand for more affordable rental housing.
During the big single-family housing recession of 2007-2008, the value of multi-family apartments remained very stable.
Stability is one of the reasons you might choose to invest in apartments.
CREATE WEALTH AND PASSIVE INCOME
A second reason is to create both wealth and passive income. If you are interested in growing your net worth, the stable, slow, but steady growth of the value of multi-family properties will interest you.
Attune Investments looks for good income-producing properties. We buy for income. In addition to the apprecIation in the value of the property, we want the property to produce net income, from month to month to month.
Are you interested in both growing your investments and getting passive income from them?
Some of the bigger players simply want a steady income stream with a stable property. They will often buy the higher-end “Class A” complexes, newly built, with many amenities. The cash-on-cash returns will be in the low single digits, but backed by real estate and a business.
We tend to seek a little higher cash-on-cash return. We do this by purchasing properties we can manage better, making improvements in the property and its operation, and growing the revenue stream.
For those who participate as passive investors in a syndication which owns a multi-family property, these are true “passive income” investments. The managing partners and property managers do all the work.
Attune Investments locates and purchases what some call “value add” apartment complexes. By careful, wise capital improvements and solid property management, we are able to increase the value of our properties significantly.
It is the nature of a commercial property that it is valued based on the net operating income. As we raise the net operating income (gross income minus expenses), we are able to create value and, with the leverage of long-term loans, multiply that increased value.
This growth of the overall investment dollars, together with the steady, passive income, combine to form a second major benefit of apartment investments: creating wealth and income.
I have realized this takes time. Often 3 to 5 years. These are longer term investments. But, the patience pays off.
DIVERSIFY YOUR INVESTMENTS
A third reason you will want to include multi-family real estate assets in your portfolio is for diversity in your investments.
Portfolio diversity is a way to “hedge your bets” as they say. It is a way to not have “all your eggs in the same basket.” It brings some additional stability and safety to your investments.
I’ve known people who were totally in the stock market during some of the huge downturns. That hurt.
If you are currently heavily weighted in stocks and mutual funds, you might consider the long-term advantages of adding some real estate to your portfolio.
Each person will choose a different percentage for real estate. Some people have chosen a rather high weighting in real estate.
As history has shown us, as some assets go up in value, other assets go down, and vice versa.
A properly diversified portfolio may not have the big ups and big downs, but rather the various asset classes will balance out the growth and returns over time.
I like having a portion of my investments in real estate and in multi-family specifically. This is a more conservative approach. I sleep better at night with this diversification. How diversified are your investments?
The first rule of investing, according to Warren Buffett, is to “get your investment returned” rather than shoot for a big return on investment.
So, you have learned three reasons to seriously consider adding multi-family investments to your portfolio. This will add stability, growth and income, and diversification to your approach.
Do these make sense to you?
If you want to learn more about how others are investing with us then I invite you to join our club and request a conversation with us.
Through the power of a syndication, a partnership with other investors like you, working with managing partners who are experienced in managing apartment complexes, you can own multifamily assets.
And take one more step. Become a member of our ATTUNE INVESTORS CLUB in which you have more personal access to us. JOIN HERE After you join, schedule a call with one of us and we can get to know each other better and answer your questions.
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Harland leads our Investor Relations. He is a “repurposed” Pastor and Army Chaplain. He is an author, speaker, mastermind facilitator, and coach. Harland lives with his wife, Barbara, in DeLand, Florida.