Purchasing something and hoping it goes up in value is risky. I believe investors should not have to take higher risk for higher returns on their investment. The market values multifamily rentals and single-family rentals in fundamentally different ways. You can control the value of your multifamily rental independent of market conditions. Whereas, the value of single-family rentals is entirely dependent on market conditions. This difference gives multifamily investors an unfair advantage in market downturns. Invest in multifamily apartments. Avoid losing money in market downturns. Sleep better at night, knowing you are in control.
Multifamily Valuation: Beat the Market!
Let’s define some terms:
Operating Income: Total Rental income + all other income generated by the property
Operating Expenses: Expenses associated with operating the rental. Operating expenses do not include principal and interest payment
Net Operating Income (NOI) = Operating Income – Operating Expenses
Capitalization Rate (Cap Rate) – A factor determined by the market. All similar kind properties in a market have the same Cap Rate.
Multifamily rentals are valued simply as:
Value of Multifamily Property = NOI/Cap Rate
NOI of the property defines its value. A property run by professional management tends to have higher NOI than a similar property run by mom & pop. You can buy mom & pop property. Hire a professional management company to increase NOI. And sell it right back at a higher price! No need to time the market, which is stressful and risky. You can force appreciation by making simple improvements to increase NOI. There are many such strategies that you can take advantage of with Passive Real Estate investing.
P.S.High-paid professionals are always wondering where to invest their savings. They don’t want to take more risks with stocks because they already have a lot of money invested in the stock market. Not knowing where to invest, they end up with lazy money sitting in a bank.
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