Many who invest in real estate appreciate that the property can be seen: a small apartment building is not a "paper asset."  As Joe Light recently wrote about in The Wall Street Journal article, "Can You Trust Private-Equity Returns" many more probably wished they had invested in small apartment buildings rather than private equity!

 Light's Wall Street Journal piece was very useful in alerting investors to problems with other forms of investing other than real estate.  With private equity and related forms of investments, there is no determining what the asset is worth until it is sold.  Many times that can result in very unpleasant surprises.  If financial planning for retirement, college tuition, or paying for a house had relied on private equity investments that were not worth anything close to believed, that could be devastating for an individual.

By contrast, there is always a reliable indicator of what a small apartment building is worth on the market.  Previous sales prices are readily available from a real estate agent or any number of sources from the Internet. A phone call to a real estate agent will bring a list of "comps" that should give an accurate indicator as to what small apartment buildings are bringing in today's market.

History tells us that small apartment buildings and other forms of real investing have been the most rewarding!

Over the last two hundred years, real estate has created about 90% of the world's millionaires.  During The Great Recession, when stocks and bonds fell in value, the level of rental income in the United States actually rose.  Rental income rises about 5% annually in the United States.  

That means that the rental income received doubles in less than 15 years!

To show how that investment income from a small apartment building can be so compelling, consider this example: a four-unit property with each renting for $1000 a month.  That is $48,000 a year in rental income for year one.  If there was a 15-year mortgage, that means the note will be paid off right around the time the rent has doubled.  At year 15, there will be over $100,000 in cash flow from small apartment building with no mortgage.  That stream of capital can be used to buy even more small apartment buildings!

There are many ways to make a small apartment building an even more appealing asset.

The owner can obviously live in one of the units.  If the building has four units or less, that means the small apartment building can be purchases as a primary residence.  That makes the financing much cheaper and much easier to obtain.  Lenders prefer to lend for primary residences as there is less risk of a default.

By far, the best way to profit from small apartment buildings is as a passive investor with a long term approach.  That puts time on the side of the owner.  Passive investing utilizes the experience of those who are seasoned professionals.  Small apartments buildings are an ideal way to profit from real estate, and a passive role with long term results will increase the gains from this form of high yield real estate investing.