Buy an Apartment Building Today?

In today’s turbulent financial markets many investors are looking for ways to grow their money that will offer a steady flow of predictable income and limited market risk. More and more people are buying apartment buildings to help diffuse the effects of inflation on their portfolios. Apartment buildings offer many exceptional advantages over traditional investments such as stocks, bonds and mutual funds. This is especially true in a recessionary market environment. In fact there are many attractive attributes of an apartment building investment that many investors who are new to commercial real estate may not even know about. There are some interesting facts about buy multi-family property investing that could radically change your perception about this fascinating and lucrative part of the investment world and inspire you to go out and buy an apartment building of your own.

Warren Buffet once said that “wide diversification is only required when investors do not understand what they are doing.” This quote seems especially true about the average investor in the United States who is listening to the advice of a financial adviser who in reality knows little more about the markets then himself. Usually financial advisers will recommend that a client be well diversified in investments ranging from stocks, bonds, mutual funds or maybe even a real estate investment trust. The adviser is putting his or her client into a group of “diversified” investments that were recommended by the firm’s top adviser and the research department. Unfortunately, however, for the individual investor is the fact that these investments are basically designed to preserve the firm’s capital under management and they don’t take into great regard the individual investor’s need to grow his capital.

The most successful investors and those that see the greatest returns are those that specialize in a particular sector. And the timing has never been better to begin specializing in apartment building investing for the average investor. The stock market is under intense earnings and inflation pressure. Investors need to look at a direct investment in an income producing apartment building to establish a profitable stream of cash flow that could last for decades to come. Many thousands of individual investors have been able to secure their financial futures by specializing in this unique niche and leaving behind the mediocrity of financial advisers and stock pickers.

If there has ever truly been a recession proof business it has to be apartment building investing. Even with the US economy is turmoil and business cutbacks people will always need a place to live. The actual demand for rental units in the US has never been higher then today. A total of 36 million of all households in the US are renter occupied. In total, a full 83% of all households under age 25 in the US are occupied by renters. Furthermore, a full 55% of all households between 25 and 35 are renters. The growing senior segment of society will be living longer and looking for rental properties as well. These are a few impressive statistics that demonstrate the strong current and projected demand for rental housing.

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This Post is from the BiggerPockets Real Estate Blog. Copyright © 2008 BiggerPockets, Inc. All Rights Reserved.

Buy an Apartment Building Today?

We have all heard the classic saying: It’s not what you know, but who you know. It’s true in life, it’s true in business and it’s certainly true in real estate. The people you know and the connections that you make have a profound impact on all aspects of your life. This was something that I discovered fairly early in my business career.

When I started in the financial services industry as a stockbroker I spent the majority of my time dialing for dollars. I spent countless hours calling people I didn’t know in the hope that they might be willing to have a conversation with me, let alone become a client. I was sure, or at least I hoped, that there had to be a better way. I asked successful veterans for tips on building a business and what they had done to achieve the degree of success that they had.

Two answers were constantly thrown back at me: networking and referrals. I was told to join the Chamber of Commerce and other business groups in order to build relationships that would lead to a steady stream of referrals. I was also warned that there is no instant gratification, relationships take time to develop. It is important to remember that it is called net-work-ing because you have to work at it.

Stage One

The first step in networking is to get out there. Have plenty of business cards and develop a 30-second commercial that clearly explains what you do. You need to develop your listening skills, you have two ears and one mouth – use them in that proportion. It is easy to spot the novices at networking events, they’re the ones running around trying to sell their product or service to anyone with a pulse. They usually go home empty handed.

At this stage you should be focusing on building relationships. Ask people what they do or what they need, then shut up and listen. In his book, The 7 Habits of Highly Effective People, Stephen Covey calls the 5^th habit: “Seek first to understand, then to be understood.” If you understand what other people want and help them get it, you will wind up getting what you want as well.

Stage Two

By now you’ve met a bunch of people and collected a lot of business cards. What do you do with them? This is where the real work begins. Many people do all of the stage one activities and stop there. They’ll say that networking is useless or ineffective, for them it is. Many people you meet will be nothing more than contacts, you’ll wind up seeing them at other events but rarely will you go beyond a casual greeting. That’s to be expected and there is nothing wrong with that.

However, you will also meet people that you are truly able to connect with. Perhaps your life objectives are similar or your businesses overlap in some way. These are the relationships that you need to nurture. Grab a cup of coffee or share a meal and get to know this person. Focus more on developing the relationship than on any one transaction. People tend to do business with people that they like.

Stage Three

In stage three you have reached the point where people come to you. When you strive to help other people they will work to return the favor in kind. You become known as someone who is well connected and is a good source of information. This does not happen overnight, but it is well worth the effort.

In real estate you need to clearly define your goals and clarify your message. Go to real estate investment clubs and become known to others. Don’t ignore other groups just because they are not real estate related. If you are looking to buy distressed properties or pre-foreclosures, you can find leads just about anywhere. You may find that you are the only real estate investor in attendance and that certainly gives you an edge.

I have built several businesses over the years using the power of networking. It is an incredible tool when you learn how to use it.

One secret of success in life is for a man to be ready for his opportunity when it comes.