Seldom, if ever were there a group of investors, either organized or disorganized such as we see and have experienced in the residential apartment house or Multifamily property market.
Most people I know got into that business by accident! After 18 plus years of dealing with landlords in their day-to-day business, assisting them in buying, selling and exchanging their properties. After many lengthy chats and informal surveys, I have come to the conclusion that most people got into this type of investment property by accident rather than on purpose.
Among the reasons most people finish there was they bought a new home and kept the old one. Some bought a house next door just so they could control who their neighbor would be, others helped a family member or a buddy with a loan and finished up getting the property instead of the loan repayment. There is also a considerable portion of this market who inherited their property and decided to continue in the business of their benefactor.
Another group of investors are those folks who attended a real estate seminar and actually implemented some of what they learned there or in the materials they purchased. Still others invested for the tax benefit and they are mostly large salary or high net worth individuals. Others got started by investing with partners or buddies and some even got started investing in REIT’s and limited partnerships.
And then there are the determined!
The folks with the plan! In my experience over the years, this is the smallest group in number but they’re the investment power in the rental property or multifamily properties.They bought, managed, bought some more, leveraged and exchanged into larger properties,or refinanced the properties they own and bought more. They did whatever it takes to grow their investment portfolio, because these folks recognized that real estate investments are the IDEAL investment for wealth accumulation and cash flow when done right.
Investors using real estate as a vehicle for retirement cash flow are typically the apartment landlord. In most cases their portfolio enjoys a more favored tax treatment while it remains outside the constraints normally associated with a retirement account. The rules,regulations and constraints like those found in IRA’s, 401(k)s 529′s and other tax favored facilities for investments and methods of wealth accumulation have limited flexibility for borrowing against and there are no withdrawal guidelines with respect to age for the real estate investor and his property.
Most all landlords, especially the determined are fully aware of the benefits outlined in IDEAL. which was adequately covered in a previous post here. The largest obstacle that all these folks have is getting good advise and direction from their paid professional advisers. Here I’m speaking of tax and legal advisers, and why it is necessary to only consult with specialists in that area or specialty.
The other area of concern is the type and caliber of real estate investment advisory or broker they use or choose to do business with. In order to successfully landlord, one needs to treat this business seriously, and that should begin with only working with specialized people in the multifamily property arena, and to use an old cliche in the business, “the day you buy, is the day you sell”. Sometimes the better option is to use the IRC Sec. 1031 or 1033 and defer or roll the Capital gain into the next building or real estate transaction.
Tomorrow we’ll expand on Sec. 1031 Tax Deferred Exchanges and and a brief look at the benefits to the investor starting at the beginning of the investment cycle.
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