Rental Property Investment Resources

Apartment building investing has important advantages over investing in single family homes

Risk Reduction
The first and foremost advantage is financial risk reduction. For example, if you invest in a duplex, you reduce your risk by half vs. a single family home. If you invest in a four-plex, you reduce your risk even more and so on. This is because the more units you have under one roof the easier it is to absorb tenant turnover.

It’s rare to have all the apartment units empty at the same time, unless something out of the ordinary has happened. Multifamily properties with one or two vacancies, generally, is not going to affect the investment’s value and you are not likely to need to place any of your income into this property, as there will always be enough tenant-generated income.

Apartment building investing is considered a wise investment because as long as there are tenants, there should be enough income to pay the loan, property taxes, property management and a repairs reserve and still have monthly cash flow. Don’t buy the property otherwise.

When a commercial real estate property is bought properly, other people pay your loan amount. The tenants pay your mortgage and expenses, and most importantly, they pay you. Because this is true, the more units you have under one roof, the more your initial investment will pay off.

Built-in Appreciation
Another advantage of investing in commercial real estate is forced appreciation. This is a very powerful concept. There are two key ways to gain forced appreciation.

One way is to buy a fixer-upper apartment building below market value. Look for apartment buildings with some fixable structural or cosmetic problems and fix them. These properties may be ones that other real estate investors are passing up rather than fix the existing problems. If it just needs simple updates to make it more profitable, it may be an excellent purchase.

Any commercial real estate property once repaired, modernized or even just painted, will instantly be worth more. There is an initial cost with any improvements you make, but it can be regained quickly by either renting at a higher price or reselling the property.

The second way to gain forced appreciation is through rental increases, whether it’s based on property improvements or annual rent increases, the value of the property is tied to the increase in rents and expense control.

Summary
Multifamily property investing is a sound, profitable way to make money in real estate. You control risk much better than investing in single family homes and property management is much easier with multiple units under one roof.

Defaults on apartment-building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter

This figure is almost twice the year-earlier level, as more borrowers failed to repay debt approved near the market peak, said Real Capital Analytics Inc. in a report.

Defaults on so-called multifamily mortgages rose from 4.4 percent in the fourth quarter and from 2.4 percent during the same period in 2009, the New York-based real estate research firm said today. Commercial-mortgage defaults also rose in the first quarter for loans against office, retail, hotel and industrial properties, Real Capital said.

This situation also presents “Opportunity Knocking Profits” for smart investors, as I’ll reveal at the end of this article.

“Apartment defaults are leading other commercial real estate,” Sam Chandan, global chief economist at Real Capital, said in an interview. “Banks tended to make more aggressively underwritten apartment loans earlier during this last cycle. Credit and pricing reached their peaks for office properties and other commercial assets later.”

The global recession cut demand for U.S. apartments, office space, retail shops, hotels and warehouses during the past two years as jobs disappeared and consumers cut spending. Defaults on apartment-building mortgages surpassed the previous record, set in 1993, for the past three consecutive quarters.

The U.S. savings-and-loan crisis drove apartment-building defaults to 3.4 percent in 1993. Defaults on other types of commercial property debt peaked at 4.6 percent in 1992, according to Real Capital.

The proportion of defaults on office, retail, hotel and industrial properties rose to 4.2 percent in the first quarter of this year, the company said.

U.S. apartments may lead a rebound in commercial real estate as vacancies peak in 2010 and the economy adds jobs, property research firm Reis Inc. said May 19. Reis estimates apartment vacancies will peak at 8.2 percent in 2010, the highest level since the firm began tracking the number in 1980. The number should start to decline in 2011, Reis said.
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Source: http://www.businessweek.com/news/2010-05-24/defaults-on-apartment-building-loans-set-record-for-u-s-banks.html
Opportunity is knocking for smart investors

There are profits to be made for smart real estate investors who know how to find and finance commercial properties that are bank foreclosures, short sale prospects or are owned by other distressed sellers.

Shorten your learning curve and avoid costly mistakes with knowledge from seasoned investing pros. Take a look at these courses:

# Commercial Property Foreclosures The next real estate bubble starting to burst is commercial real estate. Learn how to buy commercial property short sales and pre-foreclosures for pennies on the dollar with 100% financing without good credit and without any real estate experiences or licenses needed.
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# Commercial Property Buildings Learn how to buy office, warehouse and retail buildings with no cash and no credit. Right now the most profitable units are retail stores, small office space and smaller industrial spaces like warehouses of 3,000 square feet and under.
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# Apartment Buildings Learn how to start making $24,000 per month (or more) in passive, cash flow, by investing in apartment buildings with no cash or credit within 90 days.

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