In today’s investment real estate market, “RENTED?is an obsolete word. The majority of owners of apartment buildings are now selling their slow earning buildings and cashing in on better income producing housing buildings. For instance, the word “condo-ized," has appeared to describe condominium units that were converted from apartments.
What are some cost advantages to buying or doing interior remodeling to convert to a condo. Well, like housing sales, condos also benefit from the low mortgage interest rates. Also, the Investment Property buildings are easy to fill up with buyers. Why?
one-bedroom apartments frequently cost more than $800 a month. Yet, you neighbor could often buy a condominium with a payment equal to that rent.
Many years ago, before condos were so numerous, real estate investment managers used refinancing to upgrade their apartment buildings so that they could raise the rent. However, because real estate is illiquid, it took years before their secured loan returned profits. Conversely, If you invest in a whole condominium building, after five years you often have your cash back debt free and with huge profits. Also, when you buy another using 1031 exchange you may defer the capital gains tax.
So, now that you are convinced, how can you sell some of your apartment buildings and afford to buy condos? And, how many of your apartment buildings should you sell?
This is where you use wise asset management skills. You might sell two duplexes to pay off your entire Florida mortgage on one remaining building. By owning one Rental Apartment Building free and clear, you will make only profits on your monthly rent that you charge. Say this rental income gives you a gross of $49,000 a years. This money can be put into your pocket or it can be used to “condo-ize," another apartment building that you buy and then sell as condos. Of course, you must pay taxes on both the sale’s capital gain and the rental income. Still, over $100,000 cash per condo sold is a no brainer.
If you for other reasons, like sentiment, cannot sell your apartment buildings, maybe you can still refinance some buildings and use the tax-free money to purchase another property for cash. Refinancing increases your monthly debt and increases the balance on the loan; however, the cash flow earned from your free and clear investment real estate covers your increased debt. Once again, the money received from a refinance is tax-free.
If you hate the word refinance, because you want to remain debt free, you may try the "as is" approach, by fixing up your building's outside and the common areas but only cleaning and painting the individual units.
You may also rent a condominium unit if you cannot sell it. What if some condominium associations do not allow renting or limit the practice. Advertise and boast that your condominium building qualifies as a prestige resort offering seasonal renters. If you achieve this with home improvement contracts, before any condo association objection, appears, then the apple never becomes an orange and no objection ever appears.
