While many fortunes have been made and lost in the real estate business, many people overlook the value of real estate investing when it comes to planning for retirement. There are many great ways to let real estate build a nice little nest egg for your retirement, and the sooner you begin the process, the better.

While all kinds of stocks and mutual funds confuse even the most intelligent people, real estate is a straightforward investment strategy. The problem is that many people feel it is too risky. The truth is that many different types of real estate investments carry different risks to the buyer, but I’m going to focus on multi-family real estate investing.

When it comes to real estate, although it is a straightforward investment strategy, everyone’s situation is different, so it is always good to arm yourself with knowledge before taking any steps. You should carefully discuss all plans for your financial future with your trusted financial planner or advisor. His or her job is to guide you when making plans and purchases that will affect your financial stability and security. They can also help you with taxation, cost analysis, estimated inflation, and an area's average rise in property value.

As I mentioned before, there are always risks when it comes to investing. The same holds true for multi-family real estate investing. Things can go wrong.

Here is a quick discussion of the pros and cons of the types of multi-family investments.

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Class A- This class of properties is less than 10 years old and is the most expensive type of apartment.

Pros

• Prime locations
• “Low-risk” tenants, high-income wage earners
• Highest rents on the market
• Resort-style amenities
• Tenants don’t want the responsibility of homeownership
• Low crime rates
• Lowest vacancy rates
• Positive property appreciation

Cons

• Usually bought by corporate investors, which makes investments in this class more difficult, but not impossible.
• Higher Upfront Investment cost
• Higher maintenance cost
• Longer vacancy periods
• Tenants usually move down a class during hard economic times

Class B- This class of properties was built in the last 10-30 years.

Pros

• Good Location
• “Low to Moderate Risk” tenants; middle to upper middle class
• Strong average rents
• Average Amenities
• A mix between renting by choice and renting by necessity
• Low to moderate crime rates
• Average vacancy rates
• Has an advantage over Class A during economic downturns
• Requires light renovations and maintenance

Cons

• Tenants usually move down a Class during hard economic times
• Fair appreciation

Class C- This class of properties was built in the last 30 to 40 years.

Pros

• Less Desirable Location
• Usually, Section 8 or government-subsidized housing tenants
• Moderate average rents
• A mix between renters for life and renters just getting started in life
• Average crime rates

Cons

• Lower median household income
• Rough tenants, if not screened property
• More repairs needed if it was not previously maintained
• Limited amenities
• High demand for investors

Class D- This class of properties was built in the last 40+ years.

Pros

• Low acquisition cost for investors
• Cheapest rent on the market
• Investors have the potential to make a lot of money

Cons

• Usually, high-crime areas
• Higher “bad tenant“ population
• No amenities
• Highest vacancy rates which result in inconsistent income
• Requires the most repairs

When it comes to multifamily investing, the greater risks often net the greater potential rewards. The thing you must remember though, is that you are gambling with your financial future.

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We tend to invest in Class B and C multi-family because it will generate the most cash flow and appreciate faster. Additionally, you can force appreciation by improving the appearance and amenities of the property. Our team has twenty-five years of experience and currently owns 10,000+ units in Texas and the Southeast markets. Click Here for more information on how you can be invested with us.

As you can see, there are ample opportunities in real estate to create an outstanding financial retirement plan for you and your family. The only decision you need to make is whether or not this type of investing is a good fit for you. Let's get on a Call and find out.

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