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Apartments have been and will continue to be one of the favorite investments of individual investors, syndicates and other groups.
April 01, 2003 -- One of the major benefits, appealing to all types of investors is the availability of professional management, allowing the owner to have a unique investment with the following elements:
Leverage Benefits.
While many types of investments require all cash, apartments are an asset that can have large mortgage loans, up to 100% of value. Once the loan is on the property, it can be amortized or paid off strictly from the cash flow generated by the incoming rents.
Passive Investment.
This refers to the time needed for the managed property. An advantage and benefit is that the owner of a apartment property, no matter what size, is that very little personal time is required.
A Serious Investment.
Because of the loan reduction benefits, the apartment properties require a long-term commitment. It requires serious investment of capital, both borrowed and equity. Because of this, investors need professional assistance in the selection and purchase of the right units. The gravity of the situation mandates careful scrutiny and due diligence leading to prudent investment decisions.
Discipline.
Inherent in apartment building investments is the necessity to make mortgage payments, pay off debt, and maintain and care for a property that is increasing in value. By "strapping" himself with a self-liquidating mortgage loan, an apartment investor has self-imposed, long-term, 24-hour-per-day discipline into an investment program that eventually will result in net holdings valued far in excess of original debt.
Upward Trend In Rental Income.
Currently, occupancy rates are climbing throughout the country. There are still no threats of overbuilding in the near future; rental rates should move steadily upward. The climate for multi-family ownership is very good and quite predictable. Investors getting into apartment investments usually prefer the luxury units.
Luxury Apartment Projects.
Investors and developers know that distinctive-looking, luxury multifamily housing complexes appeal to an affluent market and lease well. The cash-flow is usually positive, virtually from the time the doors open, and the rentals are substantial ($1,800 and up per unit per month). The affluent market to target for these luxury units consists mainly of:
Empty Nesters.
Not yet of retirement age, the couple now lives alone because their children have grown and moved out. A single-family house (the usual American dream) no longer appeals to the empty nesters--they prefer the more carefree living offered in a luxury multifamily unit. It is a basic lifestyle decision. And money is usually not a factor in the choice.
Oinks.
One-income, no-kids individuals or couples also find luxury multifamily units appealing. The working individual, often required to travel a great deal for business reasons, will not be tied-down to lawn mowing and other chores in single-family home ownership. He or she prefers to be able to come and go at will and yet have an upscale, prestigious residence in which to entertain and relax.
Dinks.
Dual-income, no-kids couples are also prime candidates to select a luxury multifamily housing unit. Money is much less important to Dinks than the flexibility provided by such a unit.
The "Luxury" Unit.
Typically, the upscale, luxury complexes have the following types of amenities:
- A security gate-house entrance system so that visitors must be announced and invited before being admitted.
- Protected parking, often in an underground garage with round-the-clock attendants who will also clean and service the vehicles.
- Concierge services for laundry and dry cleaning and shoe repair needs, and for theater tickets and restaurant reservations.
- A community room with planned activities, such as bridge games, movies, musical concerts, and art lectures.
- A Sunday morning brunch is another popular feature.
Swimming pool surrounded by grills and picnic tables. Tennis courts, a par-3 golf course, and jogging trails are also popular.
- Most units have balconies, terraces, or patios on which to grow flowers and to enjoy the fresh air.
- Landscaping is top notch. The grass is manicured, the flowers colorful and seasonal, and the shrubs clipped just right.
- By almost any standard, luxury units are large. They are also planned with sensible traffic flow patterns. They usually include numerous walk-in closets, whirlpool baths, island kitchens with built-in microwaves and televisions, stunning master bedrooms, and thermal windows.
Note: The recently passed tax law with its $500,000 tax free gain on the sale of a residence for a married couple ($250,000 for singles) should increase demand for apartments, particularly luxury apartments. For many years, a home seller had to make a choice of buying another home and rolling over the gain or moving to a luxury apartment and paying the tax on the home sale. Now the choice is easier, when for most people the gain is free of tax. Many more older home sellers will move to the apartments. |
