Rental Income Explosion!

Our current real estate market is shaping up right now to be one of the best it has ever been.

Did you hear me right? No gloom and doom? That’s right!

Educated investors profit in every market and the available profits from this market are going to be as good as the profits many investors enjoyed from 2001-2006, possibly even better!

Do you feel a little left out right about now? Have you been reading USA Today too much? Well before I tell you what I am talking about, let’s see if the following incredible market conditions help you see the next “golden goose.” What will the following market conditions lead to?

1. No sub-prime mortgage market for less than perfect home buyers

2. Record numbers of foreclosures turning home owners all over America into 3+ year tenants

3. Low unemployment in most markets

4. Low interest rates for apartment complex buyers

5. Difficulty getting new construction loans for new apartment houses

6. Positive population growth in most major metropolitan markets

7. Abundant seller financing opportunities

8. Falling sales prices on most types of properties, including multi-family units, around the country

9. Low numbers of new housing starts

These factors all add up to an incredibly profitable real estate market for those who own and are purchasing multi-family income properties. I predicted at my Anywhere/Anytime camp in February that national rents were going to explode due to the factors above and many others. Our country is shaping up to be a rental market for the next while here.

Two recent experiences prove my point.

In April I raised the rents on about 200 of my units in one of the states I invest in. The rent raises were from 10-20% depending on the complex the units were in. Out of about 200 doors, only 3 apartments went vacant with sizable rent increases. Only 3! There were some unhappy people, but many tenants are realizing that we are beginning an unprecedented rental income explosion.

My second experience is a couple of my student partners (yes I partner) and I own a 30-plex in another state. We discovered some problem tenants that comprised a good portion of our building. We ended up kicking out 16 of our 30 renters. In about 3 weeks, all the apartments but three were rented again for higher rents than the bad tenants were paying. Sometimes cleaning house on a new building is necessary and profitable.

One of the reasons home purchasing markets take off is that over time rents increase to the point where tenants are almost paying enough to make a mortgage payment on a home. Those tenants that qualify then start to leave the rental market to buy homes. Even with the falling house prices mortgages still greatly exceed the cost of monthly rents. I routinely see $500,000 homes that are renting for 60% or less than would a buyer’s fixed mortgage would be in that same home.

Most of my rentals around the country specialize in entry-level housing and rent for $600-$800 per door. There are very few purchase options for tenants who pay and can afford that amount. Therefore, tenants would have to experience a huge “payment shock” to get out of the rental market. Furthermore, those that could or want to leave to buy a home are extremely hamstrung by the realities of our mortgage crisis.

All of these factors add up to an ever-increasing tenant base with no where to go. The reality is that apartment owners will have an ever-increasing rental income to match. As mentioned earlier, I predicted rising rents for the next 5-7 years for these reasons. I predict that rents will rise 50-100% in the next seven years, if not more. Some markets are up almost 15% this year alone!

What are you going to do about it? I would recommend, like me, to buy as many apartments as fast as you can. Can you imagine rising rents combined with fixed mortgages? Imagine that you buy a property that has gross monthly rents in the amount $5,000 per month and the rents double while your mortgage payment is fixed.

What would life be like if you had 50 apartments with that averaged $700 rent per door and the rents doubled? You would start with $35,000 per month in gross rents and get to $70,000 per month. Most, if not all of the increased rents would be pure positive cash flow as mortgages stay fixed. What if you knew how to buy those properties with no money out of pocket through seller financing and you still “Cash Flowed” from day one?

This market will be unprecedented in another way. Apartment complexes are valued based on rental income. What would happen to the value of your portfolio in a “bad” market if your rents exploded? You would own properties that increased incredibly in value while the rest of the real estate markets were trying to stop the bleeding. The incomes would force the appreciation.

Don’t miss out on this one! Learn some techniques for buying multi-family units and let the games begin! My new book, The “Highest and Best” Real Estate Investment is FULL of these techniques.

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