As real estate foreclosures go through the roof (no pun intended) and interest rates stay at a relatively low rate, apartments are still one of the best real estate investments. While homebuilders and homeowners in some overbuilt and overpriced areas have hit the panic button, there are many apartment investors who have began to slowly pick up great deals as prices have dropped while foreclosures and short sales have increased.
In the current market turmoil, it may be time for investors to look at apartment deals. We have all heard the old adages that apartments are great in that you have one roof, one mortgage, one insurance payment and all in one location instead of chasing your tail all over town with multiple single-family rental homes. If you have one vacancy in a single family rental home you are 100% vacant. If you have one vacancy in a quad apartment you are only 25% vacant. This is the major difference between multi-family and single-family properties.
In general, the Atlanta real estate market did not see the enormous surge in prices as was the case in Miami, Naples, New York, Boston and parts of California. But one trend we have seen is out of state investors who brought in loads of cash in the form of 1031 money and purchased up relatively low priced Atlanta real estate. Many of these out of town speculators have been hit hard as they have struggled to hold on to their long distance purchases that the actually overpaid chasing high cap rates (Net operating income divided by purchase price). Strike two for these out of town investors was their inability to properly manage a property in a remote location. This led to strike three as these investors floundered in making their high mortgage payments with higher vacancies rates due to bad management. The foreclosures vultures then began to circle.
A good example is the Atlanta suburb of Norcross. Apartment prices that topped $350k in 2006 have now been selling for as low as $240k as seasoned investors have sat on the sidelines and waited for the other shoe to drop. It is truly a buyer’s market as prices drop, vacancies slowly trend down and market rents hold steady. Now is the time to shop for deals and purchase apartments for the long term hold (or until the market rebounds up).
The biggest advantage that apartments offer is economy of scale. If you are able to purchase an apartment building at a below market price, you may only have to have 60% of the units occupied to break even. Any occupancy level above that is pure profit. You can determine how much profit you earn based on how quickly you can get units rented. Now is a great time to look at apartments deal for long term holds. Buying a great deal now can pay big long term dividends for your real estate investing portfolio.
More millionaires made their fortune investing in real estate than in any other form of investment. There are many methods of making a fortune in real estate investing. Regardless of the method that you use to build your fortune in real estate, you need a solid business plan to use as your road map to success. You can purchase the business plan I used to build a multi-million dollar real estate business.