“The rich don’t work for money, they work for assets.”
Have you considered investing in real estate?
Have you looked around the market, but then became overwhelmed by all the different options? I know how you feel.
There are so many choices!
Single-family rentals, multi-family, retail, raw land, mobile homes, self-storage, and more!
But lucky for you, I am here to run through the gauntlet of all of these and share why multi-family is the clear winner.
Let the gauntlet begin!
We begin the competition with what may be the most common way of getting into real estate.
Buying and renting out single-family homes can often be a great way to start, or to learn how you feel about real estate.
But there are many caveats to single-family homes that many people don’t consider.
Doing single-family rentals takes a lot of time. It is very labor-intensive.
Think about it, you are the one that owns the property, and you are the one that has to manage the day-to-day of the property.
Even if you hire someone to manage the property, you are still the one that has to take the calls and make the big decisions.
On top of that, the cash flow in these kinds of investments is low. You would have to have multiple homes to bring in a decent income (if you cash flow at all!).
Add that to paying a person to run the place, and the funds get even lower.
These investments are also not scalable. You can’t own and operate 30-50 homes. There is not enough time in the day to manage all of those properties.
However, single-family isn’t all bad.
People with a lot of time on their hands but not a lot of money tend to be the perfect fit for these kinds of investments. Single-family can be a great way for you to learn about real estate if you don’t have the capital to get into a larger investment.
Put simply: single-family is a good choice for people with lots of time on their hands.
Next on the docket is retail.
Now, retail is one of those markets that is going through a lot of changes.
With the rise of online shopping and the Covid-19 Pandemic, many retail markets are getting hit hard.
Retail is also a bit more finicky with how you invest. These deals tend to be very cyclical. You have to make sure that you are getting in on the deal at the right time.
As well, each deal is very different from one another.
You want to make sure that you know the area really well. Unlike single-family homes, there are many other factors you have to consider such as the demand for business, traffic levels, and more.
Being an expert in the area is very important for these investments. This can be the difference between making a profit or not.
I like to call this the expert mode. A strong contender in this gauntlet, but one with many more steps along the way.
Getting into raw land is very complex. It is speculative and risky.
For example, I have a friend that bought a piece of land in a hilly area in Los Angeles.
He had to work with the city with zoning and permits, and it became a multi-year process to even get the land ready to develop.
There is the opportunity to flip the plot of land, but that is again more speculative.
Raw land can be a good investment for some, but to get decent returns you would have to sink in a lot of money upfront.
This is a much more niche investment where expertise in zoning, building, or other like areas is required to be successful.
Mobile home parks
Here is a real strong contender. Mobile home parks are an investment I actually really enjoy investing in.
The returns on these deals are often really good, and the asset tends to be very solid.
Unfortunately, the downside is that these investments are hard to find.
The options to invest are shrinking by about 1% a year. This is often due to people not wanting new mobile home parks built in their backyards.
Because of this, there is a scarcity of these kinds of deals.
But if you can get into investing in a mobile home park, it can be a good option.
Over the past few years, the prices have actually gone up due to institutional level interest.
However, given the scarcity, mobile home can be a great investment to get started in real estate with, if you can find a good deal.
This is another one of the investments that I am fond of.
They do well in any economic environment!
The big benefit is that they have consistent, double-digit returns.
The downside is that the deals are getting harder and harder to find.
Currently, there are a lot of funds that have storage units as part of their investment plan, but not a lot of specific single property deals with individual storage units that you can get into.
If you are wanting to look at one specific deal and tailor pick your investment, then these more available funds aren’t a great choice.
But if you can find a deal, they can get great returns. You just need to make sure to vet the sponsor before you go in.
I almost wish the competition was more fierce, but large multi-family is the clear winner.
By far, large multi-family deals are my favorite way to invest in real estate. I could go on and on!
But let me put my money where my mouth is and show you why.
Now, I define large multi-family deals as 100 units or more for each property.
These deals come with really professional management, and you can choose to invest in these deals passively.
I love getting into passive deals because it allows me to get into as many deals as I want and not have to do the day-to-day work.
It is endlessly scalable.
On top of this, the performance of these investments is consistently in the double digits. Even a bad deal will net close to 8-10% returns.
That’s higher than the average stock fund, or many other traditional investments.
They are also lower risk than many other investments, particularly single-family.
At the height of the recession of 2009, the default rate on multi-family deals was ten times less than that of single-family homes. That is amazing!
There are also the tax benefits!
With multi-family investing, you can write off depreciated tax losses against the gains of the property. This can be substantial savings!
As you can tell, I love these kinds of deals.
It’s something that everyone should consider. Multi-family is a great way to expand your portfolio, and it makes it so your money works for you.
As Robert Kiyosaki said:
“The rich don’t work for money, they work for assets.”
Do what the rich do, find the assets that make you money.
And if you’re like me and enjoy multi-family investing, then you are in the right place.
Check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future.
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