I could tell you about the abandoned house I bought for 30,000, rehabbed for 20,000, refinanced to pull out 80,000, then rented it out to someone who’s rent covers my mortgage, savings, and expenses plus an extra $200 a month.
Or I could tell you about the house that we got in an estate sale that was broken into and the cupboard doors were torn off a week before the appraiser was supposed to come. You would be surprised how difficult and expensive it is to find just the doors without the rest of the cupboards.
I could tell you about the time that our short-term rental property on the beach covered our $4500 mortgage and expenses plus some. In the summer, we made $3000 for every five day stay.
Or I could tell you about the time that our contractor who was a flooring expert laid the laminate down in perfect symmetrical rows. Next time you are standing on a floor that looks like wood, you’ll see that they are for sure supposed to be staggered . Trust me, they look very odd if they are not.
Needless to say, all types of investing have their ups and downs.
One of the underlying things I’ve noticed with my investments is that exciting and sexy deals are often some of my least favorites and the ones where things are most likely to go wrong.
I want to invest in an asset that isn’t effected by something as small as a wayward tweet from an obnoxious CEO, or something as big as a war in the Middle East, or even something as technical yet finicky as consumer sentiment. To build generational wealth, I need to invest in something that will last the ups and downs of generations.
Multifamily has a built-in hedge against a negative economic event like a recession or depression: sure rents might want to drop to support lower incomes but, during such a period, many homeowners become renters. Historically, this has meant that multifamily investments were less impacted and recovered more quickly than the rest of the real estate industry in a down market.
Check out the graphics. I don’t even have to get into the numbers. Look at the y axis (the vertical one for you college dropouts like me). For single family homes, Fannie and Freddie list delinquency rates from 0-10%; for multi family homes, they list delinquency rates from 0-1%. This graphic covers over 15 years, and yes, that includes the 2008 financial crisis.