Investors are betting on Multi for 2014

Just as we predicted: Investors are betting on multi family properties for 2014

Chris Flanagan, MBS/ABS Strategist with Bank of America-Merrill Lynch and MBS Strategist Justin Borst said in their Securitization Weekly Overview, “the December housing starts report provided some confirmation of the theme we discussed last week, which was that it appears as if a structural shift away from getting a mortgage and buying a single-family home to just being a renter is underway.”  This new report show that single-family housing may be decreasing and the multi-family rental market will continue to grow through 2014!

This increase in the apartment rental market is due in part to many young adults renting due to job constraints and other financial factors.

Smart investors are betting on Multi – and so are we: Read More

FREE EDUCATIONAL WEBINAR

donovan-webinar

REGISTER NOW FOR THIS FREE EDUCATIONAL WEBINAR

The founders of Investar USA will take you through a 45 minute webinar about the benefits of investing in multi-family apartment buildings in Houston, Texas.  They will discuss why they see Houston as the top real estate investment market and how you can create true-wealth from investing in multi-family apartment buildings. You will learn how to earn tax free income and equity growth. You will also learn the 4 unique and profitable benefits available to you as a real estate investor.

Join us Thursday, January 30th, 2014

12:00pm (MST) and 7:00pm (MST)

REGISTER HERE

Please Join Travis Cadman and special guests from the property management team. Learn first hand how accredited investors can acquire apartment buildings in Houston.

In 2008 Travis Cadman and Ron Cadman told both Canadian and U.S. investors that the greatest way to participate and profit from the U.S. housing crisis would be to buy and hold Single Family Homes and the place to invest would be Phoenix, AZ.  As of today Phoenix, AZ is #1 in price appreciation from trough to peak. Now they are telling you that Houston, Texas us the next hot market – Don’t miss your chance to invest in another great opportunity.

Travis is a seasoned real estate investor and the principal of Investar USA. In addition to investing in single-family and multi-family apartments, Travis’ passion is teaching others the art of real estate investments. During this webinar, Travis will show you his tried and true secrets to multifamily investing in the hottest real estate market. Travis has helped thousands of Canadian and American investors get started in real estate, so we really hope you can join us!

If you cannot attend this webinar but would like a recorded copy. Please email csmith@investarusa.com and we will send you a copy of the video after the webinar is over.

19 reasons why you should invest in apartments

TOP 19 Reasons Why you should invest in apartments

Historical performance shows that investing in well selected apartment buildings produces returns not commonly seen with other forms of investing such as mutual funds and stocks and here’s why.

1) Leverage – Banks lend money on apartment buildings thus you don’t need to use all of your own money, thus maximizing your return on equity . Real Estate is one of the few investments that offers the power of leverage.

2) Tax Benefits –There are many tax advantages with Real Estate however the main         benefits are capital depreciation, 1031 exchange (U.S. only), and deductable mortgage interest .

3) Transparency – The buildings are already built, through proper due diligence prior to buying the building you can conduct a series of inspections that will provide a solid understanding of the asset. From these inspections you  can build the required budget for immediate and future repairs or simply decide to walk away.

4) Property Management –Due to the number of units in an apartment building we can afford to have professional property management that handles the on-site and tenant matters.

5) Diversification –You can invest in different buildings even in different cities.

6) Market Cycles –   If you watch the real estate market cycles you can time your        purchase so you can maximize your short term appreciation by buying at the bottom of the real estate cycle.

7) Appreciation – Real estate will always appreciate over time and you don’t have to pay for the increase in value until you sell the building. Since 1968 historic appreciation level for real estate have been 6.7% per year according to the National Associate of Realtors.

8) Cash Flow – Acquire buildings where the income exceeds the expenses thus providing cash flow for our investors.

9) In Control –  With apartment investing we are in control, we can improve these assets, improve the management, improve the rental income etc. (tough to do this with a Mutual Fund!)

10) Deprecation –The IRS and Revenue Canada allow apartment owners to deduct a “Deprecation Expense” from our annual income to lower your net operating income from a taxation perspective thus you pay less tax.

11) Refinance – We are able to withdraw cash through periodic refinancing and this is tax free money back to the investor.

12) Asset Protection –Building Insurance – if the building is destroyed insurance coverage willpay to have it replaced.

Rental Loss Insurance – If you have interrupted income due to part or all of the building being destroyed the Rental Loss Coverage which is part of your insurance coverage will pay you money on a monthly basis until part or all of your building is replaced and income is re-stored.

Limited Liability – through proper corporate structure you will be sheltered                          from 3rd party law suits

13) 1031 Exchange (U.S. Corporations  Only) –This allows us to not pay tax on the sale of a building so long as we invest in another like asset within 190 days. This means you use money you would normally pay to the government in tax and buy another building. This is simply a great investment tax savings tool !

14) Inflation Hedge –Real estate investing is one of the few investments that are a hedge against inflation as the cost of goods go up so will real estate.

15) Physical Asset –Real estate is a physical asset. It’s not some cerebral investment that is traded by a click of a button on an online brokerage. You can walk on the grounds, smell the tree’s, talk to tenants and staff,  and inspect the buildings. There’s piece of mind knowing you can touch and feel your investment  .

16) Demand – People always need a place to live. Shelter is one of the basic requirements of life. You can be assured knowing that there will always be demand for residential housing weather the market is up or down.

17) Affordability –Apartment Rentals are considered affordable accommodation thus will always be in demand. Also with the use of Leverage apartment buildings can be acquired using 50%-75% of the banks money .

18) Business Cycles –  Multifamily investments are one of the few sectors of the investment space that are sheltered by traditional business cycles. As the economy slows people need affordable  housing and as the economy pick up landlords typically increase rents as demand increases through this cycle. Note: rising   interest rates are great for landlords as homes become less affordable which simply increases the demand for rental housing.

19) Maintenance – With apartment investing our maintenance costs are spread over a number of units thus utilizing “Economies of Scale”. We will have our onsite maintenance person who will look after repair  issues on an as needed basis.

General Comments:

1) A big advantage of real estate over any other investments is the triple threat of tax advantages, refinancing, deprecation, and the deductible mortgage interest.

2) Besides the fact that there has always traditionally been a huge demand for rental housing, there are a number of factors that will cause demand to go even higher in the next decade; Echo Boomers – This group is comprised of individuals born between 1982-

1995. Over the next decade approximately 4 million “Echo Boomers” will become adults each year. It is estimated that there are around 80 million which will make them the largest demographic group in North America since 1960.

Baby Boomers -  Until their children come along (Echo Boomers) baby boomers were by far the largest demographic in history estimated at 78 million. Baby boomers are generally considered to have been born between the 1940’s 1960’s.  Over the next decade the largest demographic group in forty years will be flooding the rental market”.

For more information of how to buy and Investar USA property contact an Investar USA representative today.

PREIM Travis Cadman Alberta

CANADIANS TEACHING AMERICANS

By Susan Thomas Springer

CLICK HERE TO SEE PDF VERSION ND13-MasterInvestor-Cadman

At an age when many teenage boys are working minimum wage jobs to save up for a car, Travis Cadman bought his first house. It was a success­ful deal — a $40,000 purchase sold five years later for $96,000 — that started a successful career.

“I was able to scrape together the down payment that I needed and ob­tain a mortgage,” says Travis, a prin­cipal — along with brother Ron — in Investar USA. “I was surprised at that time, even early on, how much real es­tate I could control with a little money down.”

Soon after, the brothers bought their first rental property together. And from those beginnings, the broth­ers went on to run successful real es­tate businesses including managing rentals, doing construction, develop­ing lots and offering turnkey invest­ment opportunities to others. They’ve invested in single- and multifamily properties, worked through up and down economic cycles and learned the ins and outs of both the Canadian and U.S. markets. Going strong almost 30 years later, the brothers say their part­nership has prospered thanks to their being flexible, taking risks and learn­ing both from industry experts and “the school of hard knocks.”

“It’s the evolution of ‘one house turns into two houses, turns into three houses.’ And we’ve always been hard workers, and real estate excites us a lot, so we’ve always been willing to put in the time it takes to make things hap­pen,” says Ron.

The brothers grew up in Alberta, Canada, with a father who owned a real estate investment company. Their father and business partners had win­ter homes in Phoenix, Ariz., where they had the opportunity to be men­tored and see firsthand how cash flow and long-term wealth can be created through real estate appreciation.

“It always seemed like the real es­tate guys were having fun and had a lifestyle that was appealing,” says Ron.

The Cadman brothers bought and sold homes in Phoenix for a few years and then returned to Canada and started a homebuilding company that eventually built more than 2,000 single-family homes. Construction was a natural evolution for the then- 20-something brothers.

“In real estate, you’re always look­ing for inventory, and one of the solu­tions that we came up with was cre­ating our own inventory by building single-family homes,” says Ron. “So that entailed buying lots, forming a company that secured lots and hiring employees.”

They enjoyed the creative side of designing houses. But one building experience that wasn’t so fun was a condo project they started in a rapidly escalating market only to find the market peaked and plummet­ed before construction was finished.

“It was amazing how quickly the market turned off. It was red-hot and then just cooled right off. The buyers rapidly went away,” says Ron, who adds they hung on and completed con­struction.

“We didn’t make any money. We got the bank out, and that was probably the best we did,” adds Travis.

THAT EXPERIENCE INGRAINED TWO LESSONS.

First: “Watch how much leverage you put on your project. And the second one is, make sure you’re aware of your market cycles,” says Travis.

They also learned there’s less risk in selling lots than in build­ing homes, so they moved on to become a supplier of land to other builders.

“What we understood from that is a homebuilder is only as good as his lot base. The homebuilder is always dependent upon the developer because if there are no lots, you’ve got nothing to build houses on. So we always knew from the homebuilding side that the real strength was in lots,” says Ron.

Watchful of market conditions, the Cadman brothers saw an­other opportunity in the U.S. subprime mortgage crisis of 2008. Based on their experience in up-and-down markets, they decided the best option was buying homes in Arizona. The trick was in the timing.

“Our thought was the simplest thing to do would be to buy single-family homes and try to buy those houses in the bottom of the trough. But of course the reality is there’s no bell that goes off and says, ‘Ding, ding, ding! You’re at the bottom of the trough. Everybody buy now,’ ” says Ron.

Lacking a bell, they went to work. The Cadman brothers re­viewed market conditions and brought in a team of a dozen peo­ple to identify the right properties to buy. With trustee auctions taking place daily in Arizona, each afternoon they were faced with another list of 300 to 400 properties to review. They nar­rowed the list down to desired ZIP codes, appraised those houses and had a team member drive by the houses and take photos so they could assess the value and condition of each potential pur­chase. They meshed that day’s list with their budget and set their maximum bid price.

“People are working basically to the wee hours of the morn­ing, so by 9 o’clock you’re all set and ready to have your fellows at the auction on the courthouse steps and be ready to bid,” says Ron.

Because trustee auctions are a “cash game,” as part of the original business plan they needed to raise money for their daily purchases. So they put on their business suits and went shopping at Arizona’s banks. But they were shuffled out the door almost as soon as they sat down. One bank president told them, “Me giv­ing you fellows money for this is like me adding onto my house when it’s on fire.” So they quickly learned that obtaining leverage from a traditional source wasn’t going to happen.

They revised their business plan based on two factors — de­feat at the banks and interest from the average investor. Inves­tors had expressed disappointment with the performance of mutual funds, stocks and bonds.

“We started hearing at increasing levels of people that were dissatisfied with the current performance of their investments and of course real estate — well-timed, well-selected real estate — is typically proven to be a fairly good investment,” says Travis.

The new business plan called for funding the subprime project by sell­ing shares through a private placement memorandum (PPM). That’s a disclo­sure document that informs potential investors about the risks and benefits of buying the company’s offerings.

They kept up that successful for­mula for three years until 2012, buying about 350 houses. Now they manage a stabilized portfolio that’s cash flowing for them and their investors.

CURRENT FOCUS: INVESTAR

Today they are busy with Investar

USA, a turnkey real estate investment firm they started about three years ago that caters mostly to Canadian clients.

“Now what we’re doing is taking the same principles that we used on the single-family front and we’re acquir­ing multifamily buildings in strategic markets starting in the greater Phoenix area. They’re called ‘value-add apart­ment complexes’ that we feel we can transition from their current state to an improved state,” says Travis.

They seek buildings that are “tired” on the outside, haven’t been managed well and have rents lower than the market will allow. First they refresh the exterior and common areas, including places that need painting, the pool and parking areas. Next they improve the units when they become vacant with new flooring, upgraded cabinets and new lighting, sinks, appliances, faucets and hardware. Investar has closed on around 100 units, with another 400 un­der contract.

“So what we’re able to do with all of the improvements we did to the ex­terior and the interior is increase the rent to the current market value for that quality of a unit,” says Travis.

Investar has purchased 100 mul­tifamily units that are going through that renovation process with 400 more units under contract. In addition, In­vestar’s Arizona activity includes suc­cessfully renovating and selling 350 single-family homes that total $35 mil­lion in assets.

GROUND-UP EXPERIENCE HELPS

The brothers say it’s an advantage in their current business that they have experience building multifamily from the ground up. So they can analyze multifamily with a full understanding of what it takes from start to finish.

Through all of their business ven­tures and through the ups and a few downs, their partnership has worked without any “rifts or shouting matches” because they have different strengths, yet a shared work ethic.

“We’ve always had a goal we’re trying to achieve, and our minds have always been focused on how to achieve that goal together,” says Ron. One key to success is that they were always “starved for knowledge” and sought to learn through relationships, books, seminars and organizations.

BIG ON EDUCATION

“I think that’s one big thing for us — we were always big on trying to edu­cate ourselves and learn more so we could do more,” says Travis.

Looking back, they also realize there were some risks they took be­cause of their youth.

“When you’re that young in busi­ness, you’re dumb enough to think you’re smart,” says Ron. “Those early lessons where you get hurt, that’s a lesson that you don’t forget. Those les­sons are ones that teach you that you’re not that smart and you need to be more aware of the global economy and world economy and all of those things that will impact your business.”

The other key is people. The broth­ers agree success requires surrounding yourself with a top-quality people.

“We’ve developed a team around us that we work with day in and day out that’s really been a big part of who we are and what we do,” says Ron.

Travis Cadman Alberta

multi family investing, apartment, condo, investment,

Apartment Investing – Is it for you?

Having rehabbed over 300 single family homes and purchased over 200 apartment units in Arizona this past year I’m often asked, how can I finance and benefit from buying an apartment building.

 

While most investors concentrate on buying one single family home at a time, there is another strategy largely overlooked. From the very beginning of my career in Real Estate I have looked for ways to generate the maximum amount of money in the shortest amount of time. I also realized that there were certain advantages that multi-unit complexes had over single-family homes when it came to investing.

 

  • Cash Flow: Cash flow on a multi-unit complex is much greater than that of a SFH. Simply because you have more rent coming from various units.
  • Better Cap Rates: With the sea of investors flooding the single family home market the cap rates have compressed dramatically. Our analysis tells us the Multi-family market (in specific major U.S. cities) with building sizes between 50-250 units  will be the next asset class to capitalize on as rents are rising due to rising population growth and a shortage of housing … thus better Cap Rates
  • Property Management: With a Multi-Unit complex you have one central property management company, whereby single family homes in different areas will have different property managers overseeing their territories.
  • Vacancy-loss: The more units you have under one roof, the less potential risk you have. If you have one single-fmaily investoment property and you lose your tenants, you’ve lost 100% of you monthy income. But, if you invested in a multi-unit four-plex and lost only 1 tenant, you would still have the other 3 tenants paying your rental income and expenses.
  • Cheaper by the Dozen: The same as with buying anything in bulk. The more you purchase the better the deal! Carry this concept to multi-family housing, you will find great savings buying a 6 unit complex compared to buying 6 single-family homes one at a time.
  • Lower Taxes & Financial Costs per Unit: In most cases significantly lower taxes per unit and financing one large multi-unit project will cut costs for loan fees, appraisals, surveys,etc.
  • Economies of Scale: Owning an apartment complex vs several single family properties means the cost to maintain several roofs, several yards, several properties to market and manage are reduced to one roof, one building to maintain so the economies of scale are in your favor.
  • Greater Appreciation: A $90,000 single-family home that appreciates 10% will be worth $100,000, while a $500,000 multi-unit complex in the same market with 10% appreciation will increase by $50,000. That is a $40,000 appreciation that you have benefited from.

 

With the Arizona Market poised for continued growth, and forecasters projecting 24.5 percent job growth through 2017, this is the perfect time to invest in multi-family apartment buildings. With Phoenix’s relatively low cost of renting (just under a $1 per square foot) and high occupancy rates (about 91 percent), the rental market is expected to continue to thrive right along with the housing market’s hike in home prices and dip in foreclosures. Investar USA will be bringing you a new educational series on how to invest in apartments in the USA.

 

If you would like for information, please contact Travis Cadman at Investar USA.