wealth is created during economic downturns, when jobs are scarce and people
are afraid to invest. How can that
be? The reason is that profit is created
when you buy a property, not when you sell it.
In difficult economic times, owners default on their mortgages,
businesses fail, and properties are available for discounted prices. Debt is the reason most of these properties
become available at much lower prices.
For example, in the last two years, I have seen so many multi-family and
storage properties sell for a fraction of the price that was paid only a few
years before. The most extreme example
is a large apartment complex that sold for $35M in 2005 and was sold by the
bank again for $2.5M cash in 2010! I
expect the original buyer was a REIT (Real Estate Investment Trust) and the price was inflated. But, whoever bought it in 2010 got a great deal!
In the multi-family and storage property sector, there were
lots of deals available in 2010 and 2011, but now is a good time to secure your
future financial freedom since prices/unit are likely at their
lowest. I will include diagrams later in
this article. This segment of income
properties has recovered quickly because of increased demand for rental housing
due to foreclosures and tightened lending, the down-sizing rental needs of the aging
baby-boom generation, and the demands of natural population growth.
After looking at hundreds of REO multi-family and storage
properties, I am buying two bank-owned storage facilities in an area with
recent job growth. The properties
consist of 520 units, built in 2003, located within 20 minutes of each other,
with a total acquisition price of $1M.
The deal has exciting upside potential!
When I am able to bring the property to 85% occupancy (the average in
the local market), the property will be worth $2.8M or more. Cash flow is so good, based on current and
projected future occupancy, I could pay respectable interest on the principal,
pay back the full initial invested amount with additional interest, and then
continue to pay monthly interest (even though all principal and interest have
I have studied and visited…..
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