In this world, planet Earth, there’s a few things that make change and push us forward into different stages of evolution. These include things like love, innovation, collaboration, intelligence, but most importantly, money. Without money there’s no way to have a sustainable life and without money there’s nothing to run businesses or to create goods that people can then purchase. One of the best ways that people have found to make and grow money is by investing in real estate and one of the best real estate investments is investing in apartment buildings and learning about Office Development Services dayton oh.
Real Estate: Investing in Multi-Family Apartments
There are many different ways to make money in the game of real estate, but there’s one method that has created millionaires in almost every market. Most real estate methods involve time and money and become a job in which the profit becomes the income of that job. The end-game of any business is for it to run and be profitable without you putting all of your time into it, and this is exactly what apartments do. When you invest in apartment buildings the following is what you get and are looking for:
- Acquisition fee
- Mortgage Paydown
- Tax Benefits
- Inflation Hedge
Because you’re going to be putting the apartment deal together, doing all the research, and checking items off the due diligence checklist you are given an acquisition fee. This fee can be anything from one to five percent of the purchase price. For example if you’re making a deal on a six million dollar apartment building you will have to set you acquisition fee to lets say 3%. In this example you would be receiving a $180,000 check at the time of closing.
Because the apartment building you will purchase has already been in business, you begin to receive cash flow at the beginning of every month as soon as the deal is under your control. Most people will also refer to the cash flow as the Net Operating Income (NOI), but there’s a difference. Cashflow is the amount of money that the building is bringing in, and NOI is this cashflow minus the expenses of the building. Because the tenants are the ones paying for rent, they are also paying the mortgage down which is great for you as the owner.
In conclusion, in this article we discussed the topic of real estate and investing in apartment buildings specifically. By owning an apartment building (we recommend 16 units or more) you’re able to receive a fee at the closing table which is considered income. You also get cashflow and mortgage pay down which increases your equity in the property and the payments come from the tenants. You also get tax deductions by being able to write off any money you spend on improving the property as well as writing off any loses you take from the property. Finally, it’s an inflation hedge because the money is safe and backed by the real estate as opposed to cash.