If you are reading this, I can assume that you have some interest in rental property. More than likely you are already a landlord of at least one property. You have probably already seen the good, the bad, and the ugly of the life of a landlord.
You should know that I was once in the same boat as you are.
I owned three single-family rental properties and saw the tremendous value in the appreciation, someone else paying my mortgage, and, of course, the incredible tax breaks.
But I also realized that in order to really get the returns I wanted to help me retire early (isn’t that what we all really want), I had to buy at least 30 single-family houses to be able to replace my income.
That’s where reality set in.
I started to think about those late-night phone calls from tenants.
I remember one time I got a late-night call from one of our tenants. There was a big storm and part of the roof had been damaged. Water was leaking onto their bed. Getting someone out there in the middle of the night was a nightmare. And expensive!!
Another time, we made a surprise visit to one of our tenants whose rent was late almost every month and found they had caused over $5,000.00 damage to the house because of dogs that we didn’t even know they had. Evicting her was a pain and again: EXPENSIVE.
So much for our profit that year.
These are just a few of many stories. I’m sure you have plenty of nightmare stories to tell. too
When I think about multiplying those nightmare stories by thirty times or more with 30 more houses, it makes me cringe.
I started thinking There must be a better way. So I started researching everything I could.
I then heard a podcast about Multifamily investments (investing in apartment complexes with other investors). It was an interesting idea and made a lot of sense. I started digging up anything I could find.
I read voraciously and listened to tons of podcasts. What I found kinda blew me away.
I simply came to realize that I could make more money investing in apartments through a syndication with zero headaches and without dealing with late-night phone calls or bad tenants.
I literally had to do nothing but invest.
Now of course, like any investment, I did my due diligence and thoroughly checked out the operators of the syndication. (The managing partners are called the operators)
The ultimate fact is the numbers don’t lie. Take a look at these two case studies.
A SINGLE-FAMILY INVESTMENT CASE STUDY
Let’s say you want to purchase a single-family residential rental property for $200,000 today in Texas. Let’s also assume you want to finance the property. Here is what your investment looks like numbers-wise:
30% down payment = $60,000
~3% in closing costs = $6,000
Total Cash Investment: $66,000
Let’s assume your mortgage payment with taxes and insurance is $1100.00.
You rent the property for $1600/month based on the area’s current rates. You have a property manager that you pay 10% a month; in addition, they charge you half of the first month’s rent to find a tenant. You plan to hold this property for five years and then sell it.
There will more than likely be vacancies, repairs, and maintenance, so let’s assume $50/month toward maintenance as well as a 5% vacancy every year (just to be on the safe side).
We’ll also add a conservative 3% increase in rents annually.
Your net income after 5 years would be around $21,892.41.
Now, if all goes according to plan, you will sell the house in year 5.
Let’s add another 3% increase in annual value over 5 years, putting the sales value at $231,854. You owe $128,344 on your mortgage balance.
To sell your home, you will pay:
$13,911 for a 6% selling fee to a broker
$6,955 for 3% in closing costs to the title company.
$128,344 to pay off the mortgage note
Total Deduction of $149,210
= Net Profit from sale = $82,643.88
+ Plus annual net income = $21892.41
– Minus your initial investment of $66,000
Total Return On Investment = $38,536.28
*assuming a 5% interest rate, $2400 in taxes, $1200 in insurance, and $30/month HOA
A MULTIFAMILY APARTMENT INVESTMENT CASE STUDY
Now, let’s look at investing that same $66,000 you put down in the scenario above into an apartment purchase with a syndication group instead.
The group plans on purchasing a 118 unit complex in Savannah, GA. Their business plan is to lower expenses, increase rent, make some capital improvements, and then sell the property in 5 years.
The group has offered you a preferred return of 7% annually (paid out quarterly), and they have agreed to give you your pro-rata share of the equity when they sell the complex. They are purchasing the property for $11,500,000 and will sell it for $20,650,000** in 5 years. They also assume a conservative 3% market growth rate annually on the rental income.
They tell you it’s a 20.60% Annual Rate of Return, 10.2% Cash on Cash, and a 16.70% Internal Rate of Return. The total return on the investment is projected to be 103%. While these may be new business terms, we can still break down how each year will pay over 5 years:
Year 1 = $3,842
Year 2 = $4,620
Year 3 = $5,755
Year 4 = $4,620
Year 5 = $4,917
Annual Returns = $23,754 over the 5 year hold time
+ Plus Your Equity Gain Portion paid at the sale of the property for $44,222
+ Your initial $66,000 investment back at
Total Return On Investment = $133,976
As I said, the numbers don’t lie.
I now only invest in multifamily apartment syndications. I mean realistically, why would I want to make a lot less money and deal with all the headaches when it’s completely unnecessary?
Not only do the investment strategies make so much sense, but it has inspired me so much. I chose to really educate myself in the field of multifamily syndications and am now a sponsor/operator myself with a spectacular team.
My team co-owns and operates 218 doors total and is growing every day.
To sum it all up, the top 3 reasons to invest in Multifamily as opposed to buying another single-family rental property are:
- You are tired of the headaches of owning and managing single-family properties and would like to make more money with fewer headaches.
- The numbers don’t lie. Multifamily is far more lucrative.
- You are smart and this makes total sense.
Call me and let’s go over your financial goals. Together we will create a plan to get you there faster with far less headaches and much less work.
It simply makes sense.