Small apartment buildings offer an ideal way to develop a lucrative investment portfolio over time for the passive investor.  Is that a perfect way to way to invest?  Of course not, but it can be superior to all other types of investing.

If an investor were to commit to acquiring just one small apartment building a year, there would significant wealth achieved.  This would not require much money.  If the apartment building has four units or less, it can be acquired as a primary residence.  That means that only a small down payment is required with the lowest mortgage rate offered.  Lenders are willing to do this as primary residences are more secure properties to finance as these are the least likely to go into foreclosure.

There is the first step to small apartment buildings being a superior, if not perfect investment: low cost financing with little cash required.

After the first one is obtained, year two will feature the search for the second.  If done correctly, the cash flow from the first small apartment building will provide the down payment for the second one.  If the second small apartment building is purchased as a primary residence, then only a small down payment is required.

Buying the second apartment building as a primary residence means moving into it, but that is a small hassle when developing a portfolio of real estate assets that will generate rental income to meet all of your needs after a critical mass is achieved.

There should come a time when the cash flow from the small apartment buildings can provide the capital needed to finance additional purchases.  Over time, the cash flow will increase from this high yield real estate investing.  That is the history of rental income in the United States.  Not only does it increase about 5% annually, this also transpires in adverse economic conditions. Over the course of The Great Recession, as stock and bond prices plummeted, the level of rental income in the United States actually rose.

Not every one wants to move every year, but that is a minor step to developing personal wealth and financial freedom.  

The numbers prove this: if a four-unit apartment building was bought in year one with each renting for $1000 a month, $48,000 would be booked annually in rental income.  If there was a 15-year mortgage, when the apartment building was owned free and clear at the end of the note there would be about $100,000 a year in free cash cow.  Should the apartment building be part of a retirement account, that would be $100,000 a year in tax free income.  

That is just from a single four-unit apartment building.

If a commitment was made to develop a portfolio, even more investment income would be produced.  As there are no taxes on assets in retirement accounts, the rental income could be tax free.  Not perfect, but a very nice investment portfolio of income producing properties!