The multifamily sector has come back strong with the foreclosure market and the insecurity of owning a home because of the declination in value, and bills piling up at home. Apartments are a great investment with such an incredibly high demand with close to 45% of homeowners being upside down, and struggling to pay their mortgage payments now. Their hardships include job loss, divorce, taken a pay cut because of the economy. The reasons are really endless, but unemployment or job loss now are the main problem for most people. This creates a huge demand for renters that usually slide into apartment buildings in nearby areas.
As an apartment owner, you will receive great cashflow, appreciation over time, and If you put the deal together, you can also get an acquisition fee, which is usually 3-5% of the sales price. This is usually split up with partners that are investors in the deal with you. Other sectors of commercial real estate are not doing as well right now. The apartment sector always seem to move ahead of other commercial investments. The consistency in income is proof of this, as compared to other commercial investments. This is also why banks will fund a higher loan-to-value ratio of your investment if you are investing in a cashflowing, and stabilized apartment deal. Lending institutions prefer properties that are 2 million or more in value. Of course, this is different dollars in each market. A 50 unit apartment building in Boston will cost 10-12 times that of the same building in Dallas or another Southern city.
Any time you buy an investment, you make your money when you buy it right. You can also get a bank owned apartment building or a deal that is a short sale, and buy it at 40-60% of the market value. The deals out there right now are unbelievable, but there is also a lot of competition. You need to work with a large brokerage company that can send you the type of deals that your investment group purchases. You may want to buy in secondary or tertiary markets if the competition is too high in a primary market. For example, instead of buying in Seattle, Washington where the competition and price is much higher, you could buy in a closeby area such as Tacoma.
In summary, the economy and need for rental housing nationwide is fueling the demand and prices for rental housing. Large apartments are going to be the way to go for a long-time. The bigger the apartment building, the easier to finance with a bank, the more cashflow for the investors. The reasons are many, which is why this is a great investment. We just touched on a few for you to get a feel for the power of this investment.