Investing And Financial Freedom Can Go Hand In Hand
Here Is My
Real Life Example...
My apartment investing endeavors have allowed me to become financial
a very young age. In fact, from the time I was a teenager I had a keen
in real estate investment, and vowed that someday I would become "rich"
using real estate as a vehicle.
Now, if you had asked me to define what "rich" meant back then, I may
have given you a different answer than I would today. "Back then" I
probably would have quoted a sum of money that I would have had to earn
to be considered rich.
Today, I look at things a bit differently.
My view of "rich" today would more likely be defined as being financially
free. Which of course begs the question, what does it mean
to be financially free, and what role does apartment investing play?
Defining Financial Freedom
Someone achieves financial freedom when there passive income exceeds
their living expenses. And by passive income I mean income that you
earn even when your sitting on a beach sipping a tropical drink.
Of course, how much passive income you need in order to be financially
free depends on how much your living expenses are, which of course
varies from person to person.
Apartment Investing As A Vehicle To Financial
Investing in apartment buildings (and other commercial properties) can
be a great way to achieve financial freedom. When purchased properly,
these type of investments can provide monthly passive income for as
long as you own the property. In fact...
it is even possible to create a
passive income from an apartment building that is 100% financed!
A 100% Financed Real Estate Investment Cash Flow
Here is an example of just how powerful apartment investing can be, and
how just one deal
can put you on the path to financial freedom.
This is not a hypothetical
apartment investing example.
This is a real life example of an apartment investment that I purchased
over ten years ago, and that I still own to this day. It has been 100%
financed for the past ten years (ie. I have none of my own money in the
deal) and pays me a
passive income of approximately $30,000 to $40,000 per year.
It gets better.
Once I refinance
the mortgage in two months time, and complete the next
round of rent increases, my monthly passive income is set to jump to
approximately $60,000 to $70,000 per year, or about $5,000 to $6,000 per month.
It gets even better.
The monthly cash flow is just one way I have profited from this
building. In the ten plus years I have owned this apartment property
the value has doubled and
the mortgage has been paid down (by my tenants) by $147,000. This adds
approximately $750,000 to my profits.
So how did I do it?
Here's a quick look.
Actually, this deal "found me". I was in my office minding my own
business so to speak when a realtor called me and presented the deal.
Once you have done a few deals, and people know you are a serious
player, the good deals start to find you!
This deal was a little bit unique.
When the commercial real estate agent called me he was not actually
trying to sell me the property. He was trying to sell me a contract
to purchase the property that his client (another investor) had secured
but could not close on. (His client could not put together the
rate of the property "as is" was over 10%. That was good. But,
after conducting some due diligence, I knew that I could increase that
using a few of my "valuing adding" techniques.
I also knew based on my research, that I was going to be able to
purchase the investment property well below market value.
Based on those facts, I ended up purchasing the contract and closing on
There is an important lesson to be learned here. With nothing more than
$1,000 and some leg work, the original investor secured this deal and
flipped it to me for a tidy profit. The lesson? If you find and secure
great deals you can make money regardless of how much money that you
actually have. You can always sell the contract or take on a joint
venture partner. Believe me, if the deal is good enough (and it must be a very good deal),
the money will follow.
Because I was confident that I could add significant value to the
property over the next six to twelve months, I chose to assume the
existing mortgage. Why would I do that? My plan was to
refinance after the value of the investment property increased so that
I could take out most, if not all of the initial down payment. And that
is exactly what I did. After holding the property for 8 months, I had
increased the value by $225,000. When I refinanced, I did it based on
the "new" value, not the price I paid for the property. Therefore, at a
LTV of only 75%, I was able to finance the property 100%.
This apartment complex is located close to 1000 miles from where I
live. That being said, I needed to put competent property managers in
place to run the building for me. This
is one of the beauties of apartment investing. If you buy
the property correctly, the revenues will pay for you to hire managers
to run the day to day operations.
Value To The Deal
As I alluded to above, one of the things that made the deal attractive
was the opportunity to create some "forced appreciation".
The Profits From Apartment Investing
- I purchased the property below market value and
with the ability to add value.
- I immediately put professional managers in
place that take care of all of the day to day operations
- In eight months time the property was appraised
at $225,000 than I paid for it.
- I refinanced the property at that point and
took out close to 100% of my investment.
- In the past ten years the value of the property
increased a further 50%, or roughly $400,000.
- For the past ten years I collect a passive
income every month from the building, and continue to do so.
- Within the next 4 months, after refinancing the
mortgage and increasing rents, I anticipate that my annual passive
income from this one apartment building investment will exceed $60,000
Clearly, apartment investing can be a terrific vehicle that the average
person can use to achieve financial freedom. If you would like to stay
in touch and receive notification when new information is added to this
site, please consider signing
up for my free newsletter.
In the meantime, if you wish to learn more about how you can start
investing in apartment properties, I recommend a course offered by a
colleague of mine aptly entitled, "Buy
Your First Apartment Building". It's a great way to learn
more about getting started in this lucrative business.
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