So what is the multi-family syndicator’s secret to great returns?
Well, any multi family property you buy is going to need some work. If it’s in great condition, the price will be so high that you can’t make any money on it.
If you can buy it at a good price, it’s because it needs work to bring the rents up. So you’ll need to do some big renovations before you see any returns.
This strategy is what multi-family Investors call: ‘Value Add” and this is how most of the successful syndicators make money on their multi-family investments.
The trick is that when you do a substantial renovation, you’re making a profit on the improvements that you’ve made to your new property, in other words on the construction that you’ll be doing to fix it up.
That construction is how you bring the rental income of your new property up.
But your profit shows up not only as higher income, but also as a bump up in your equity as soon as construction is complete and the income stream is stabilized.
In other words, if you’ve done it right, the property is now worth much more than the total of your acquisition cost and improvements and that’s because of the value of the work that you put into it, right?
What most people don’t realize is that building new construction income property is the Ultimate “Value Add” strategy.
Because the entire property is new, you’re maxing out the amount of improvements and you are also maxing out the income because new construction units always command top rents.
So by building a new construction building, you’re maximizing this bump up in equity that you get as soon as your property is completed and the rental income is stabilized.
On top of that, Brand new units attract the best tenants and rent quickly for top rents. Right now, there’s huge demand for new construction units and rents are at all time highs.
This is why you see big developers putting up high rises and big multi-family buildings just as fast as they can right now and that’s why you should follow their lead!
My new book:
Don’t Buy Multi-Family! BUILD IT
is on Amazon now, but if you’re watching this, there is a link in the text below to get a Free eBook Download.
It’s a short read, but it will show you how you can get started building and owning brand new income properties.