Let’s say you bought a condo for $150,000 and rented it out. First, you would most likely have a negative cash flow because rents are not high enough to cover the expenses on the condo. No problem, you say. “I’ll make it up with the appreciation and make the money when I sell it.” Sounds great, right? Not so fast. With a negative cash flow on a typical condo you would have to pay about $9,600 per year to keep your condo. And, that’s including the rent you receive. The condo would probably appreciate at a rate of 4.5% per year on average. After ten years you could sell it for about $230,000. After selling costs and paying off the balance on the mortgage you would have $114,000 left over. Still think you made money? After all, you have $114,000 cash in your pocket. Well, you paid a total of $117,000 over the ten year period in caring costs. That’s a loss of $3,000! That’s not even the worst part. Your $114,000 is only worth $80,817 after factoring inflation. That’s a real loss of $30,000 in purchasing power.
What’s the answer? Apartment buildings. Investing in multifamily apartment buildings produces positive cash flow every month, putting money in your pocket each and every month. In addition, the property appreciates as well. When you sell, you will make a large gain. Add the cash flows and the gain on the sale, and you have a formula for success with returns far in excess of inflation. To learn more about multifamily apartment building investing visit The G-Organization.