Is this the time to invest in Multi-family apartments and actually make money?

We all know that several of the solid multi-millionaires are made by owning real-estate. There is a reason to why an investment in Real Estate is solid as rock (or must we say bricks and sticks!) because the underlying asset is a ‘Real’ asset as compare to in many cases they are derivatives or contracts of options.

There are several ways to create wealth from Real Estate:

Residential Real-Estate – Buy/Hold. Flip, Rehab, Notes, Buy-Lease, Buy-Owner-Finance and so on. Commercial Real-Estate – Build, Acquire and Manage strip-malls, office-buildings. Multi-family Real-Estate – Build, Acquire and Manage multi-family apartments, apartments homes, Mixed-use Real-Estate – Mix of multi-family, retail and some commercial

All have their merits and de-merits like any other investments. Multi-family becomes a great investment because those who cannot afford to purchase a house need to rent it. So there is always demand and it may vary based on where the property is located and what amenities are provided with the rental.

Another reason why Options 2, 3 and 4 are more attractive because these assets’ are valued based on not market-place and location but more importantly cash-flow. In other words, the cash-flow takes care of the location, amenities and proximity to other facilities such as retail shops, transport station and access to highways.

Off-course, like any investment for it to be successful money-maker, the asset has to be acquired or built at ‘right’ price. One thing the recent recessionary market has taught our ‘loose-lenders’ is to evaluate the asset value very closely. This due-diligence by the lenders actually helps the investors because they know that the lenders, unlike in the past, will not bloat the market-value of the property.

Working with the right acquisition company and developers is the key. Many of the so called ‘gurus’ claim to be doing a great job of taking investment dollars and purchasing the assets at not so good prices, at least not a good price for the investors for sure. If the ‘gurus’ are so good at acquiring these properties, they did not have to go around spending millions in marketing to make multi-millions by charging students for their so called training classes. Well, not all the ‘gurus’ are same either.

It is also important how the loans are acquired and whether or not the investor and investors’ dollars are at risk. There are all kind of loans out there. The one who makes the most out of those is the lender itself and then makes it a ‘recourse-loan’. The right investment house is able to get great loan terms and ‘non-recourse’ hence protecting the Limited Partnership that may be acquiring the property as well as the investors.

If one does not have an experience in investing, it is a good idea to understand the terminology and pitfalls before investing. A well-managed Class-A multi-family asset can provide returns in mid to high teens easily. Off-course, it is not easy to make that claim across the board since there are lot of variables so be sure to do your own due-diligence before investing in an asset and in the market.

The key drivers that would drive the occupancy are: (1) Job Growth and (2) Infrastructure Growth. For example, there is a lot of infrastructure and employment growth in Texas triangle – Dallas, Austin and Houston. These are certainly hot places to focus for a multi-family investing since it buys more for your dollars.