Compared to single-family houses, you can build wealth with investment properties with less search time. Even in high-cost areas, a $5 million or $10 million portfolio of houses would (or at least should) include at least 15 to 20 properties. In lower-priced areas, a portfolio of this amount might include 50 properties. To buy that many houses would require several thousand hours to find houses, look at houses, evaluate neighborhoods, negotiate purchase contracts, and apply for loans. With income properties, you can work up to a $5 million or $10 million portfolio with as few as four to eight acquisitions. Even if each deal takes three to four times as long to complete as one single-family purchase, you still save search time.
As you move up to a $20 million, $30 million, or $50 million portfolio of properties (should you plan to grow that wealthy), a comparable sum devoted to single family houses would prove impossible to acquire and manage. If you want a life (not a job), investment properties provide more return for each hour spent in property acquisitions and negotiations. If you own 15 or 20 houses, you own 15 or 20 roofs, electrical and plumbing systems, and yards to oversee. If you own two or three investment properties instead, you reduce the number of components that will, at some point, need attention. Although maintaining an investment property can cost more per building, it costs less per unit, in terms of both dollars and time.
If you choose, you can also own net lease investment properties. Net lease office buildings, shopping centers, and free-standing retail stores shift responsibility (in varying degrees, depending on specific lease terms) for maintenance, repairs, property taxes, and insurance to the tenants. You can operate multifamily apartment buildings under a master lease (likewise for office and retail). With a master lease, one master lessee (tenant) pays you and assumes responsibility for leasing out individual units (spaces) and paying expenses. As another alternative, employ an on-site manager who attends to day-to-day concerns that arise. Compensate your on-site manager(s) with a nominal amount of rent reduction. On-site people can perform some maintenance and repairs, address most tenant problems or concerns, and prepare and lease vacancies as they occur. To build wealth avoid paying taxes. For owners of investment properties, the Internal Revenue Code offers a generous advantage. As you acquire larger and larger properties, the law permits you to pyramid your wealth-building tax free through a Section 1031 tax deferred exchange.
Remember - Buy Low, Sell High - Now is the time
Step-by-Step, Affordable Training Videos on How to Build or maintain a Powerful commercial property Portfolio, covers land, apts, multifam, retail and more!
By: Raymond Pedersen