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Apartment 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 free at a very young age. In fact, from the time I was a teenager I had a keen interest 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 Freedom

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 Example

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.

1. Finding The Deal

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!

2. Analyzing The Deal

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 financing.)

The cap 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 the deal.

Sidebar: 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.

3. Funding The Deal

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%.



4. Managing The Deal

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.

5. Adding 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".

6. Collecting The Profits From Apartment Investing

Let's recap.

  • 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 per year.

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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