Real Estate Business: 6 Reasons Why You Should Invest In Apartments
When done responsibly, investing in real estate still proves to be one of the best ways to grow wealth and to earn a steady income. The real estate industry is a lucrative one, and it's always in demand. People will always need homes, and some need more than one home. Without a doubt, real estate investment, and earning through it is one of the best options for those that wish to take an active role in growing the money that they have. For many, this is better than merely keeping your money stagnant in a bank account that earns nothing but a little interest.
But, now, the question comes. With the many possible types of real estate investments to go for, what could be the best choice? Every kind of real estate has its respective pros and cons. When you start to weigh each against that of another, it's easy to conclude that there's no one single real estate type that's better than another. The choice boils down to a matter of personal preference, and in making the most out of the investment that you've chosen.
But, here, the spotlight is on apartment buildings or complexes. Investing in apartment units can be an excellent option and it works the best for those that are now longing for that additional source of income to come in their accounts, with a slow but sure appreciation of their investment portfolio. For many in real estate, it's their investment of choice.
Here are excellent reasons as to why real estate investing, particularly in apartments, as a part of your investment portfolio or real estate assets is a good choice:
- It Gives You A Dependable Inflow Of Income
When you invest in apartments, you're increasing your income-earning capacity. Rather than just having one house that is rented out to one family, you can rent out multiple but smaller units to more families. This fact alone makes it easier for you to find tenants, as many homeowners are looking for smaller apartments to rent for a lower price.
With apartments, you also don't have to worry when your tenant leaves, unlike when renting out a single-family home. There are still other apartment units that are leased to existing tenants, while you find another renter for the current empty apartment unit.
By these facts alone, it's easy to conclude that through apartment rentals, you've got a more dependable inflow of income. When you have multiple apartment units rented out, this makes your cash inflow more liquid. In fact, you may even also enjoy a faster return on your investment.
By this, it means that it's faster for you to pay off what you've spent as capital to purchase the apartment in the first place. Then, now you can finally enjoy the income coming in as profits. That's an excellent source of passive income. Literally, while you sit down, you've got income coming into your bank account.
That said, here are creative ways that you can also enhance the income-earning potential of your apartments:
- Offer additional storage options within the apartment complex that are also available for rent. That way, no space in your apartment building is wasted. Plus, your tenants only pay for the additional space that they need.
- Offer furnished or semi-furnished units. When you offer these options, you're increasing the marketability of your apartment. The price will also differ, depending on the unit that they choose. In so doing, you can sneakily charge more for rent, by having that direct comparison of how much it'll cost for a semi-furnished one versus a fully-furnished unit.
- Offer property-related services, at an additional charge. Every additional opportunity to earn an income helps. In this case, by providing other property-related services, you're also increasing your business potential. These services can range from anywhere between lawn mowing to cleaning services for your tenants.
- Offer convenience services. As you offer property-related services, now you may also want to add convenience services as well. These services include, for instance, babysitting, dog walking, and even laundry services.
- Reduces Debt Through Property Income
For some real estate investors, you may have been lucky enough to pay in cash for your property investment. This is also possible, especially for those of you that already have a fat bank account. This is also the case if you're buying only a single apartment, as the cost will naturally be cheaper than it would be, had you chosen to purchase multiple units.
But, this isn't always the case. There may also be those of you that chose to apply for a loan so that you can purchase your property investment. In most cases, this is like a business loan. This isn't necessarily a bad thing, except that it only puts you in additional pressure to ensure that you've got a regular flow of tenants coming in, so you can also pay off your debt on the property.
With apartments, it's easier and faster for you to pay off your debt. This has to do with the fact that with apartment units, you've got multiple families renting out each unit. Hence, your earning and income capacity is increased. This is unlike renting out a single-family home, where it may be harder for you to find a tenant. When the current renters leave, then you'll be faced again with the burden of paying off the monthly mortgage on the property through your savings account, while there's no tenant yet at the moment. If you also have an existing mortgage on your family home, then that's one debt on top of another that you have to be worried about.
This isn't the case with apartment units. In renting out apartments, it's easier and faster for you to pay off debt with your property income. This stems from the fact that you're able to divide the total monthly mortgage amount by the number of units that you have rented out to different people. There may even be instances when your income is coming in so fast that you'll also be able to pay off your debt more quickly.
Remember, there are advantages that you can gain from paying off your debt in your property investment earlier than usual. These include, but aren't limited to, the following:
- It reduces your debt-to-income ratio
- It results in better cash flow for your bank account
- It enables you to purchase more rental property earlier
- It removes the need for you to pay for interest
- Opens You Up To More Tax Benefits
Everyone loves to enjoy good tax benefits and reductions, don't they? Surely, you do too. Whatever little deduction or exception that anyone can have on their tax payments is already a big enough help, financially. The good news is that with your income from property rentals, you're also a right candidate for many tax benefits.
To be sure of what tax benefits are available to you, you should take the time to ask your local tax body. But, in general, some of these possible tax benefits or deductions include the following:
- Legal and professional fees. You can deduct whatever amount you spent on legal consultations about your property. Not only does this include your consultations to lawyers, but also property specialists and accountants, for instance.
- This is every landlord's most significant deductible expense. These include, for instance, mortgage interest payments that you've been paying on the loan to purchase that apartment property rental or loans that you also acquired to improve your apartment rentals.
- When you've got multiple apartments rather than a single-family home, this also means that you're going to have to take out higher insurance coverage than you usually would. But, don't worry about that expense as you can deduct the premiums that you pay for your insurance for almost any insurance that you take out in relation to your apartment rentals.
- Repairs. If there's any disadvantage to renting out apartment units, it may have to do with the need to perform more repairs than you would with any other rental property. This stems from the fact that with apartment units, the coming in and out of tenants is faster than with a house. But, you're also allowed to deduct the cost of your repairs in the taxable year in which they occurred.
- Gets Easily Affected By Inflation
Inflation refers to the increase in the average price of certain goods, over a specified period. In general, no one likes inflation. When the costs of goods increase, this also means that your purchasing power decreases. In simpler terms, if you used to be able to buy ten apples for ten dollars, now that may be reduced to seven apples for ten dollars.
But with real estate, especially when you're the owner or the investor, inflation is a good thing. This means that when the prices of the goods increase, you can also effectively increase the price of your rent. Apartment rentals, in particular, gets easily affected by inflation.
The good news about this, however, is that even when you increase the rental price of your apartments, you're still going to have renters coming in and inquiring about your property because smaller apartments are always in demand. Even when they've increased in prices, most people feel like they've got no other choice but to push on still, as they need to have a home.
As the owner of the rental property, this works to your advantage. Inflation thereby gives you a good enough reason to increase the price of your rentals. Therefore, you're also increasing your earning potential.
- Appreciates As An Asset
If you're going to keep tangible assets on your portfolio, particularly in real estate, apartment units will always be the right choice. It's one of the assets that appreciate, so you don't have to worry too much about still having to pay for the mortgage over the property, as it continues to become a more valuable asset.
In the worst-case scenario, if you'd need to or when you do decide to sell your apartment units, you'll still earn a profit over this sale. Naturally, the selling price will already be higher, as the price or market value of the property itself will already have appreciated.
Apartment complexes are also the most susceptible to positive increases in value. Thereby, the net operating income of each property also increases. Hence, your asset portfolio becomes more robust and profitable.
Note that in this case, the appreciation of the apartment rental units is each doubled. There's the appreciation of the building itself, plus also the increase in the value of the land in which each unit sits on.
- Beefs Up Your Asset Portfolio Faster
It's faster for anyone to beef up their asset portfolio faster with apartment units. This case is also most notably so with apartment rentals. Especially when you're still a first-time or newbie investors, naturally, you can't afford to go for bigger, more luxurious options. You don't have to limit yourself to not having an asset investment portfolio at all when you've got options through apartment units.
In a basic example, it's cheaper and easier to acquire and manage ten apartment units, rather than have ten single-family homes. With the latter option, you're going to have to deal with tenants coming from different geographical locations. This is going to be so much harder than with apartment units, where your ten tenants are all just in a single location.
Through that example alone, now you can see that not only are apartment units cheaper than other real estate types. But, it also introduces you to the world of real estate investment better, so you can also work more efficiently towards beefing up your asset portfolio faster.
If you're one of those that are on the hunt for robust investment opportunities, then the real estate industry is definitely for you. It's also the right investment choice for those of you who wish to see your money grow more than simply keep it on a savings account. If you're a risk-taker and you're well versed with real estate, then go for it. In particular, choose to go for apartment rentals. This option is a good place for you to start. Plus, in doing so, you're also enabling yourself to enjoy the benefits enumerated above, and so many more.