There are many reasons to invest in your future and investing in a proper investment grade asset can go a long way in getting you to your goal. I wanted to quickly highlight five great reasons why you should consider investing in an apartment building. If you have any questions, I’m available for consultation and can help you with your purchase. We are also always looking for listings for our clients so feel free to reach out for a free evaluation.

Leverage:

Real estate is a great way to build wealth because it offers you the option to leverage your money hence making it work for you. Leverage is defined in the dictionary as:

lev·er·age

noun
1. the exertion of force by means of a lever or an object used in the manner of a lever.
“my spade hit something solid that wouldn’t respond to leverage” synonyms: grip, purchase, hold; More
2. FINANCE
the ratio of a company’s loan capital (debt) to the value of its common stock (equity).

verb
1.  use borrowed capital for (an investment), expecting the profits made to be greater than the interest payable.  “a leveraged takeover bid”
2.  use (something) to maximum advantage.  “the organization needs to leverage its key resources”

Leverage is very important to investing because it helps you increase your purchase price and affordability to be able to take advantage of additional opportunities that may present them self.  For example, if you’re looking at purchasing a sixplex in Toronto for $1,000,000; you can purchase it for as low as 20% down which means you can leverage your $200,000 to acquire a property worth 1 million dollars while the asset would pay for the loan and all its expenses.

Cash Flow

Apartment buildings have the ability to not only pay off their own debt but also generate passive income for you to support your life style.  In today’s market, it’s hard to find buildings in the metropolis areas that cash flow so it’s important that you do your due diligence before hand to make sure the property you’re interested in will not only pay for its expenses but will also leave some money for you at the end of the month.

Equity

There’s a saying that money is made when you purchase the property; hence it’s very important that you pay close attention to the terms of the purchase along with what you plan to do with properties.  There are a couple of different ways you can make money at the purchase

• Get the property at a discounted price
• Buying a property to renovate (fixer uppers)
• Rezoning the land to serve a better use
• Foreclosure opportunities

These opportunities usually come into play when you have a motivated seller looking to sell their property quickly and will often come out of the blue to you.  These can help you buy into equity at the purchase and further increase value by renovating.

Appreciation

One of the reasons I love investing in Multiplexes is because it offers the most clean-cut way to project future value of a property based on the income the property will generate after renovations and rental increases.  I call this forced appreciation where a buyer purchases a property that needs rehab and is able to renovate it to a high standard and command high market rents.  Since the purchase price was lower, the buyer is able to refinance the property once the work is completed and units rented as an equity takeout and based on how much the property has appreciated can get most of their initial investment back freeing them to invest in another venture.

Monthly payment into mortgage

Every month that you own the property, its building up it’s egg via the vehicle of mortgage payments and you are getting closer to having a property that is paid off with little to no intervention.  In a rising market like Toronto, this can be compounded as properties appreciate, rent rise and you would be able to make larger payments into the mortgage and pay it off faster.

There are lots of other reasons why you should be investing in real estate and they all require careful considerations and risk assessment to ensure you’re not getting in over your head and into trouble.  It’s highly recommended that you work with an agent or a consultant that is familiar with the ins and outs of Apartment buildings and plazas and can help guide you through the process and be an asset to your journey.