Multi-family real estate returns

Dec 28, 2018

Multi-family real estate returns

This post outlines how multi-family real estate investments provide income you can live off of and continue to grow your wealth at the same time.

Streams vs lakes for wealth

First thing to get clear is the path to financial freedom and sustainable wealth is not by having a large bank account or investment account. This is the fallacy we have been taught and it is what keeps Wall Street going. Forget trying to build a large lake of income. Instead think of streams of income!

Rather than drinking from the lake when you need the income and slowly draining it down, you can drink from a stream. With multiple streams of income all flowing to your lake, you can continually drink from them while still keeping the lake full. I show an example of how this works below.

Rules of thumb for real estate investment returns

Each multi-family investment will perform differently. Despite implementing the same strategy, the numbers are dependent on many factors. That is not to say, there are no rules of thumb. In fact there are some very good and reliable ones.

I review many deals before investing in them. My real estate investment criteria is outlined on this site as well as in my free e-book. In summary, I look across many deals before investing in any of them and before letting the Summit Investment Club members know about them.

Typical key performance indicators and financial metrics on the deals are:

  • Annual Cash Returns: 7- 12%
  • Capital Gains at sale: 20 – 60%
  • Duration of investment: 3 – 7 years
  • Total investor return: 70 – 110%
  • Total IRR: 13 – 20%

These are very good investment returns and are make so much better when you consider it is completely passive, it is tax favored and in most cases tax free and you are investing in something everyone needs – a place to live.

How easily can your real estate investment grow?

Remember, real estate investing is not a get rich quick scheme, but it is get rich for sure. So let’s look at how an investment can grow and how large it can grow

Growth of a single multi-family investment over time

Using the rules of thumb above, you can see that an investment of $100,000 can grow to over $1.3 million as the returns are reinvested into additional deals over time. Multi-family real estate investing provides high levels of investment income (tax favored income) and grows the investment itself substantially at the same time.

How much does it take to start?

Multi-family real estate investing is done through a syndication. It is outside the reach of most individuals. Thus, we form a private equity company and buy the investments with many other investors in a syndication. This is the same way many large companies invest in private equity and real estate and it is governed by the Security and Exchange Commission (S.E.C).

While you do not need $100,000 for your first syndication, you do need to be an accredited investor or a sophisticated investor with a previous personal relationship with the deal sponsors. This is why these deals are hidden in plain site. We think buying an apartment complex is not something individuals do – which they do not. Secondly, most of us do not personally know people who do these deals.

Want to grow faster?

If you are like me, you want to grow faster. Once I found this strategy and made the personal connections, I wanted to jump on the fast track. I knew I would not get rich overnight, but I wanted to go as fast as I could. So I invested in several deals right away. Each year after that, I reinvested the income made from the earlier deals as well as savings from my salary into more investments.

My taxes went down due to the favored investment status and my investment income went up. Thus each year I had more and more money to invest and the snow ball continues to grow.

Want to join me?

If you want to join me on this investing journey to passive income, early retirement and creating generational levels of wealth, then please consider joining the Summit Investment Club, downloading my free e-book and / or leave me a message.