Small Apartment Building will Be There when Social Security is Not:

Everyone wants to enjoy a retirement lifestyle that meets their needs and rewards them for all of the hard work in the previous decades.  But according to a recent article by Barron's columnist Thomas G. Donlan "The Myth of Social Security," Small Apartment Buildingfinancial planning should not count on that check from the government.  

For whatever shortfalls result in Social Security, owning small apartment buildings can provide the income to enjoy retirement.  

Donlan's June 17 piece in Barron's focused on the questionable way that Social Security is funded.  Buying small apartment buildings is easy to do, by contrast, particularly if the investor lives in one of the units.  By doing that, this real estate investing becomes even easier.

If a small apartment building has four units or less, it can be bought as a primary residence.  That means the owner has to live in one of the units.  It also means that the lender will finance the transaction with a small down payment and low interest rate.  That is done as primary residences are considered the most secure of real estate to finance.  Owners are more likely to default on a loan for a vacation house than the home for their family.

Buying small apartment buildings early and often with a goal towards providing retirement income means starting early.  This puts the power of time on the side of the investor.  It also means that the mortgage is paid off sooner.  Rents will also have more time to rise, increasing the amount of income for retirement from the small apartment buildings owned.

In the United States, rents rise about 5% annually.  That means the rental income from a small apartment building will double in less than 15 years.  If there is a 15-year mortgage on a small apartment building, when it is paid off the rent will more than have doubled when the note is paid in full.  That provides tremendous cash flow for the investor.

The more small apartment buildings that are bought the more the owner will be rewarded from high yield real estate investing.  Critical in this is risk management, which is true for any asset class.  The owner of a portfolio of small apartment buildings must protect against downturns.  The Great Recession proved this lesson for all investors.

For small apartment buildings, being a passive investor with a long term approach is best.  

Investing with seasoned professionals and benefiting from their experience is the ultimate in risk management.  Jerry Cohen, President and Founder of EquityBuild, a real estate investment firm, has been a principal in more than 1000 transactions since 1984.  Many of these have been profitable deals involving small apartment buildings.

Owning small apartment buildings is an ideal way to provide for retirement income.  Rents rise and the mortgages should be paid off in bought soon enough in advance.  Passive investing for the long term provides the needed risk management, which protects the reward of an enjoyable retirement for the investor.