Investing in Apartment Buildings

Discover the differences between investing in Multi-Family properties & Residential Homes

There are 4 very important differences between investing in Single Family homes and Investing in Multi-Family properties, and these differences are described below:

Difference #1 – Trial & Error

You can ‘attempt’ to invest in single family homes, and if you make mistakes they are, in most cases, not very costly (on the grand scale). In fact, ‘attempting’ to invest in single family properties is how you learn the process.

With multi-family properties, the universe is not very large. This means that there are substantially fewer players in the game (realtors, bankers, vendors, investors). There are also not nearly as many properties. What this means is that you will earn a reputation in your target market very quickly and this reputation (right or wrong) will precede you as you attempt to enter into transactions and look to close your deals. So you will need to be prepared and knowledgeable about your market BEFORE you make your first offer. And more importantly you will need…

Difference #2 – Money

In 99% of cases involving multi-family investing, you will require a substantial amount of liquid investment capital and a strong net worth statement. This can come from a combination of you and a joint venture partner or from yourself alone.

With single family property investing, it is quite easy to find the money AFTER you have found the deal. In fact, some of these transactions require little or no money to complete. In addition, when investing in a single family condo or house, the down payment and closing costs are quite low. This is very different from the multi-family investing world – you have to multiply the complexity.

Due to the tighter time lines in doing your due diligence and the approval process, it is extremely difficult to start hunting for a financial partner after you have found a building.

Meaning, in order to keep your reputation and to ensure that you are getting the best deals possible, you will need to have all of your partners and finances arranged up front. You (and your partner, if there is one) must have your Sophisticated Investor Binder in place, you must know your financing ability, and you must know that you can close on the property on time. If you do not and you end up failing to close on a couple of properties because you really didn’t have your financial ducks in a row, you will be hard pressed to see another good deal come across your plate in the future.

Now some good news:

Difference #3 – No Real Limit

Often, when investing in single family properties, an investor will hit the ‘financing wall.’ This artificial wall is created by lending institutions and is put there to limit their ‘risk’ with each investor. These rules have changed within the past 18 months and have become tighter, so being up to date is critical. It is a basic financial calculation that tells them when they believe you are at your limit for borrowing and it doesn’t matter how good the property is that you are bringing them.

If you’d like to hear an audio interview with and investor who has seen these profits by building a portfolio of over 1,200 properties, click here.

The good news is that when investing in multi-family property, the wall is not in place. The lenders look mostly at the financial performance and potential of the building, with the lender being secondary to the equation. As long as the property fits their system, you stand a good chance to get your approval. There isn’t any artificial wall – it is completely a financial transaction. Which leads to…

Difference #4 – Business Transaction

With single family homes you are often dealing directly with someone who lives in the property and has an emotional attachment. The sale of the property is often one of the largest financial transactions they will ever undertake, and most don’t have very much experience in the ‘business side’ of real estate.

When dealing with the majority of multi-family vendors and more experienced realtors, you will find that the discussions follow a more business-like pattern. Numbers are the key elements in the transaction and your ability to justify your offer and your terms will all boil down to business and the discussion of what is reasonable and what the banks will finance. There are many more prevailing facts available in the multi-family investing world which help to reduce risk.

Conclusion

These are just four of the many key differences between investing in single family homes/condos and multi-family investing. Each style of investing has its pros and cons, each has its risks and rewards. It is often stated that an investor should really complete between 7 and 10 single family transactions before they even attempt multi-family investing. This will give the investor the foundation of knowledge, confidence, and relationships from which to build a successful multi-family portfolio.

If you’re worried about how the recent changes in Canadian mortgage rules will impact your real estate investing…looking for a safe, proven way to make the banks work for you…or even just ready to take your game to the next level…

Then it’s time to consider a jump into multi-family investing.

Multi-family investing is one of the fastest, safest ways to accelerate your portfolio for huge monthly cash flow and massive profit pay-outs — even in tight lending climates like ours — if you know how to do it right. Be sure to visit the ongoing real estate discussion on Canada’s Premier Real Estate Community and Discussion forums >> www.myREINspace.com.

If you think Multi-Family investing is the right means to boost your long-term wealth strategy, be sure to check out all the details on REIN™’s Multi-Family Investing Bootcamp coming up on June 18 & 19 at the International Centre in Toronto. Cheers!

–

Don R. Campbell is a Canadian-based real estate investor, researcher, author and educator. He is president of the Real Estate Investment Network™, and Cutting Edge Research Inc. He and his experienced team are leaders in providing Canada’s most current real estate investment education programs and economic research materials.

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Some encouraging news for real estate investors looking to buy investment property in an area with a strong job market.  Kitchener Waterloo is growing while many economies across Canada slow down.

Remember Ben’s Rule of Rental Real Estate: Buy rental property in strong job markets, near major employers

From Daily Commercial News:

“Strong fundamentals driving Kitchener-Waterloo into 2011

Kitchener, Ont.’s economy is heading into the second half of 2010 in high gear, based on the employment report for July and the building permits statistics for June.

In July, employment growth in the Kitchener-Waterloo metro area (+7.8% year over year) was the fastest among the 27 census metro areas in the country, and more than three times the national average (2.3%).

Year-over-year job gains in July were particularly strong in business services (+42.1% year over year); finance insurance and real estate (+31.0%); professional and technical services (+16.7%); wholesale and retail trade (+16.2%); manufacturing (+15%); and accommodation and food services (+8.3%).

This strong pattern of job creation was accompanied by exceptionally healthy year-to-date gains in residential building approvals (+68%), as well as in all three categories of non-residential building, led by institutional (+134%), industrial (+121.9%) and commercial (+109.8%).

Specific projects that contributed to this increase in building plans include: the Barrel Yards, a 25-storey residential, commercial and hotel project in Waterloo, Ont.; an office/tech building in Waterloo; and a new provincial courthouse designed to put the three courthouses in Waterloo Region under one roof.”

So that’s what the job market in Kitchener Waterloo is doing – what about the rest of Ontario and Canada? A recent headline from The Record reads Canada’s jobless rate edges up; Waterloo Region’s dips to 7 per cent.

I guess that’s why Kitchener Waterloo is the #1 city to invest in Ontario, according to the REIN Top 10 Towns list (see:

Top 9 Reasons You Should Invest in KW Real Estate)

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Kitchener Waterloo is Ontario’s top Real Estate Investment Destination, again.

Well, it’s that time of year again. Kitchener Waterloo is getting some more much deserved attention from Canadian Real Estate Investors all across the country.

KW has been named the top real estate investment destination in Ontario by the Real Estate Investment Network for a couple years in a row (see: Kitchener Waterloo Real Estate ranked #1 again), and this year the trend continues.

REIN released the REIN Top 10 list that named Kitchener Waterloo the #2 investment destination in Canada, and tops in Ontario again.

From CTV News:

The Record reports:
REIN “refers to Waterloo Region as the “economic Alberta of Ontario.”
That means Waterloo Region is seen not only as the economic engine of the new Ontario economy, but also that it “will outperform all other major regions in eastern Canada,” says REIN president Don Campbell
For indicators, he points to job growth, student growth and a new light rapid-transit system.”

Why are real estate investors focused on our city?  Let’s take a look at the reasons why people like buying investment property in Kitchener Waterloo

Top 9 Reasons People Are Investing in Kitchener Waterloo Real Estate Now

1. Top Area to Invest – The Real Estate Investment Network named Kitchener Waterloo & Cambridge (“the Technology Triangle”) the #1 city to invest in Ontario and #2 in Canada, behind Calgary.

2. Low Interest Rates. currently we have very low interest rates – although there is a slight upward trend right now – which makes NOW a great time to invest.  Rates will be going up in the future. It’s a matter of how soon, and how much.  Smart real estate investors are taking advantage of historically affordable cost of borrowing money.

3. Great prices – Investors love Kitchener Waterloo because it has a booming economy, without big city property prices.  Our clients invest in condos ranging from $120,000 on up, and there are opportunities to buy multi-family housing with cap rates of 7%, leaving room for healthy cash flow with today’s low interest rates.

You can buy good quality new construction rental units here, for much less than you’d pay for an older condo in Toronto.  (That’s what our cilents from Toronto happily do, over and over again).

4. Growth – Kitchener Waterloo is growing at a rapid rate. If you haven’t been here in a few years, just drive down King St! There are mulitple mega million dollar developments that are underway or have been completed recently – The Bauer Lofts, The Barrel Yards, the Arrow Lofts, Kaufman Lofts, the new McMaster medical school and University of Waterloo Pharmacy school, the new King St streetscape in downtown, the new Uptown Waterloo, the Kitchener Market, Market lofts; and LOTS of development in the university areas as well.

Also, the University of Waterloo has recently announced plans to double it’s footprint over the next 40 years. See Is Waterloo’s Student Housing Market Being Over Built?
5. Stable, Diverse Economy – Kitchener Waterloo is a market supported by strong fundamentals – world class high tech companies, universities and NGOs; a strong manufacturing sector; proximity to Toronto and the United States; an international airport; continued job growth etc.

In the July 2010 figures released by Stats Canada, the jobless rate of the KW area fell, while national unemployment rose.

6. Access to Property Management – all of our clients have access to world class property management for a very reasonable rate. Contact me for more details !

7. Great Business Community – Major companies and organizations call the Technology Triangle home including RIM (makers of the blackberry), Toyota, OpenText, Manulife, Sunlife, the Perimetere Institute, the Centre for International Governance Innovation, and a host of world class local companies.

8. Awesome, Smart People: Kitchener Waterloo is the MOST INTELLIGENT COMMUNITY IN THE WORLD. Take that Toronto

9. Great Resource – You have found a real estate agent and Wealth Building team that is focused on building your wealth!

What are some of the reasons you like investing in Kitchener Waterloo? Let us know in the comments!

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Waterloo area best for real estate: report

Toronto ranks 8th on list

Friday, October 2, 2009 | 8:43 PM

CBC News

The Kitchener-Waterloo-Cambridge area is the best place in Ontario to buy a house or invest in a business property with hopes of making money, according to a report released Friday.

The report was issued by the Real Estate Investment Network, a consulting organization that provides investors with property information. It assessed the potential for real estate properties to appreciate in value in communities across Ontario.

The reputation of the Kitchener-Waterloo-Cambridge area’s reputation as a technology hub is responsible in large part for its desirability, said Don Campbell, head of the Real Estate Investment Network (REIN).

“You’re seeing [BlackBerry maker] RIM and seeing the high-tech industries still continue to grow and hire,” he said. “And at the same time, they’re revitalizing the downtown of the old cities of Cambridge and Kitchener and now they’re talking about [light rapid transit],” he said.

No longer a surprise to anyone reading this blog, but still a nice reminder

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