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How Leveraging Debt Increase Rates of Real Estate Returns

#2024blogs May 01, 2024

Debt is a four-letter word when people promise future earnings in exchange for items that depreciate and produce no cash flow, such as a personal vehicle or vacation to Italy. In contrast, multifamily real estate is an asset that can appreciate and produce revenue. A loan for multifamily housing uses debt as a lever to unlock earnings that exceed the amount owed to a lender. For this reason, the term leverage is synonymous with debt.

Mortgages As Good Debt

Residential mortgages make it possible for people to own homes without waiting years or decades to save enough money to buy them outright. Similarly, multifamily property investors can begin building wealth via mortgages without waiting years to amass the funds necessary to pay six or seven figures for an apartment building or duplex.

Even, an organization dedicated to helping consumers overcome debt problems, describes mortgages as good debt. A mortgage enables a person to leverage earnings into a place to live and future...

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Strategies for Building Long-Term Wealth with Multifamily Investments

Multifamily real estate presents tremendous opportunities for investors to make money. Rental rates and operating expenses determine the Net Operating Income (NOI), which is total rent collected minus expenses. Savvy investors have the ability to improve both of these variables by identifying value add opportunities. The best value-add opportunities arise from relatively small problems or shortcomings that investors can fix in a short amount of time.

Increase Cash Flow. Cash flow derives primarily from rent. When analyzing a property prior to a purchase, an investor looks for a location where rents lag behind current market rates. This situation creates an immediate opportunity to increase cash flow by raising rents.

Property owners and managers measure the local rental market by using online tools like Zillow, Trulia, or RentBits to study data about current rents. When the market shows that people will pay more for a comparable unit, then landlords can write new leases that reflect...

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Using Retirement Funds To Invest In Multifamily

Retirement plans mostly corral participants into investing in securities and bonds. Real estate investing, particularly investing in syndicated multifamily real estate, is beyond the scope of employer-sponsored 401(k) plans and standard IRAs. However, a self-directed IRA and a solo 401(k) can be set up for real estate investing. These specialized accounts can unlock multifamily real estate's potential for higher returns. They appeal to people because a typical IRA might only earn a mere 1% to 2% annually.

Self-Directed IRA Custodians

A custodian for a self-directed IRA is a third party organization. The U.S. tax code requires the custodial structure when people want to self-direct their investments. Although many custodians are available to the investing public, not all of them are prepared to handle real estate investing.

How to Select a Custodian for Real Estate Transactions

Investors will have to search for custodial organizations that specifically allow for real estate...

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A Deep Dive into Multifamily Investing with Apartment Educators

Why Do We Invest In Multifamily? There are numerous investment opportunities available. At our company, we focus on educating individuals on investing in multifamily apartments. Our business model centers around a strategy that aims to deliver significant returns, generate cash flow, capitalize on equity and tax benefits, and acquire secure assets, primarily in the housing and real estate industries.

Roughly 3-5% of apartment buyers are Real Estate Investment Trusts (REITs), while pension funds and other institutional investors account for approximately 5-7%. Interestingly, regular individuals allocate around 90% more of their funds to private placements than they do to stock market investments. 

Take Your First Steps and Get Educated. To handle intricate details and legal obligations effectively, it is necessary to have specialized knowledge. You must be able to communicate using the same language as others in the multifamily industry. Identifying opportunities, minimizing...

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