LIL’ BUDDY’S BLOG – BUILDING WEALTH THROUGH MULTI-FAMILY INVESTING!
LIL’ BUDDY’S BLOG – BUILDING WEALTH THROUGH MULTI-FAMILY INVESTING!
THE CHICAGO REAL ESTATE MARKET AND OTHER THINGS CHICAGO FROM THE POINT OF VIEW OF A LITTLE WHITE DOG!
You know every morning as I’m taking my daily walk down Austin Avenue on the beautiful Northwest Side of Chicago I get approached by all kinds of folks. Most ask me the same question "What has made you the dog you are today?"
Well I have a couple answers for that.
First I have always been an avid reader. The Journal the NY Times Chicago Trib Business and Real Estate sections as well as classical English and French literature and poetry.
Second and most important – I believe in investing in real estate. Condos mainly but also multi-family residential properties.
The other day my Dad (Dean’s Team Member Dean Moss) and I attended a thought-provoking seminar in which the featured speaker was John Dessauer head of The Dossier Group in Crown Point Indiana. A very successful real estate investor and business owner as well as a self-made millionaire John discussed the strong potential return on multi-family apartment buildings for those considering investing in real estate.
With the residential resale market softening somewhat both nationally and regionally and with interest rates beginning to rise on mortgages Dessauer noted that on average residential rents are increasing. With this increase in rents the market for rental buildings on average is growing and such buildings are appreciating in value in some cases higher than appreciation for residential condominiums and single family houses.
Many local communities and larger cities are frowning on adding new rental units. This creates a scarcity of supply and further increases potential for appreciation.
Now in Chicago prices for smaller apartment buildings four units or less are actually declining nearly 1.5% over 2006 levels according the June 6th edition of the Chicago Association of Realtors Market Update. Although the smaller buildings do not offer the percent return or the economies of scale that the larger six-plus unit buildings offer they do offer a less-costly way for the smaller investor to develop a real estate investment portfolio.
Another noted investor I am closely acquainted with David Lindahl lists Five Money Making Advantages of Multi-Family Investing in an article he recently posted on the Real Estate Investors Club website.
The first advantage is cash flow. Monthly cash flow on a multi-family building is greater than that for a single family property of condo since multiple streams of rent come in each month. The risk of lost revenue is less as well – it would be rare to have complete vacancy in a multi-family building.
More cash flow makes it easier financially to hire professional property manager to handle many of the day-to-day details in running the property. You as the investor would spend less time running the building and more time more time seeking out additional investment opportunities.
The larger the building the greater the economies of scale in running it. Maintenance costs and ongoing expenses are spread out among more living units and far more cost effective.
There is far less competition for investors of multi-family properties. Many newbie investors fresh from watching late-night "Get Rich Quick" real estate infomercials buy single family homes rather than the more conservative and definitely less sexy multi-family properties.
Finally when you sell dollar-for-dollar appreciation is considerably greater. In Chicago for example a $400000 single-family home appreciating at 3% each year would sell for just over $463000 after a five-year holding period. A four-unit small apartment building initially priced at $700000 assuming the same rate of appreciation would be worth $811500 over the same period – nearly doubling the cash appreciation!
Read David Lindahl’s entire article for more details and check out his other writings in how to build wealth by smartly investing in Real Estate.
Woof I bet you didn’t think a Little White Dog would know so much about Real Estate Investing! Well back to my reading.
You dogs don’t let on to your humans that you know so much about making money! They might send you out to work! No way is that as much fun as sleeping walking and hanging out in the back yard.
Feel free to share you comments with me anytime. I’ll pass your sage advice along to our human Team members!
Enjoy the weekend and don’t give Papa any lip this Sunday Father’s Day!
YOUR ACE REPORTER ON FOUR PAWS
BUDDY HOLLY MOSS
