Investing in Multifamily Real Estate to Provide for Your Family

Are you interested in a secure financial future for your family and children? I am too. Here’s a small example on why I feel so strongly about creating wealth through investing in multifamily real estate.

As a parent, family person, or individual, one of the best decisions you can make is the right investment early on that will help take care of all the financial problems and needs of the future.

I am going to share with you a real example from my own life of how using an investment of $35,000 I secured a multifamily property generates $24,000 annual cash flow and will earn approximately a quarter-million dollars of equity over the next 12 years! Starting with that $35,000 investment, my wife, Lisa, and I secured a college fund, living expenses, and monthly income for our newborn son. Here’s how it happened…

About four years ago we had an opportunity to buy a mixed-use property (three apartments and one store) in Wilkes-Barre, Pennsylvania. It was not a big property, but we liked the location (five minutes from new casino) and felt it would be a good long-term hold.

The purchase price was $65K but it needed $75K in renovations, which brought the total investment to $140,000. At the time we only had about $35,000 in cash budgeted for this, so I called an investor I had worked with in the past and he agreed to lend $105,000 at 10% for 1 year.

We closed on the property, had the renovations complete in three months, and the property was 100% occupied within eight months producing over $3,000 per month in income. Now for the best part: The beauty of commercial real estate is that if the cash flow is there, banks are willing to lend.

We have a friend that works in the commercial banking department at a small community bank in Pennsylvania. I called him up to inquire about a commercial loan on the income property and he told me it wouldn’t be a problem, I just needed to send over the package with income and expenses, the leases, the work completed, and a little background on myself.

Thirty days later I saw how easy it was to create wealth through multifamily real estate. I walked into the bank and was handed a check for $105,000 at 6.5% for 15 years, and it was under my company name. I immediately paid the investor off. Now, three years later, the property generates positive cash flow and only has 12 years left on the mortgage. In just 12 years, we will be making more than $24,000 in yearly cash flow and have accumulated over $240,000 in equity.

This is not a massive skyscraper deal, but it is an illustration of what you can do when a good opportunity pops up. As an investor you are armed with the right knowledge.

My son is just over a year old, and by the time he’s 12 that property will paid off completely by the tenants, and he will basically have an entire college fund along with cash flow at his disposal!

Now scale that scenario up to a 40-unit building — all you have to do is add a zero, the principles are the same! It is possible for you to create wealth for yourself through the purchase of an income-producing multifamily building just like we did and be on your road to increased cash flow and net worth.

Panama’s Real Estate Boom

DONALD TRUMP can’t be wrong, can he? Trump has fallen so much in love with Panama that he is building a $220 Million, 65 story (2.4 Million square foot) hotel/condo monoliths called the Trump Ocean Club International Hotel & Tower in a posh Panama City neighborhood. Trump will build 500 luxury condominium units along with a 312-room hotel. This complex will include a casino, private beach club and a marina. Groundbreaking is scheduled around this Christmas with a completion date in 2009.

Why is Trump doing this in Panama of all places? In an April 24, 2006 press conference in New York, Donald Trump said his interest in Panama was sparked three years ago when his “Miss Universe” pageant was held in Panama. He saw that Panama city was “beautiful” and vowed he would develop there if the right opportunity came up. His project was “easily funded”, noting that as many as seven “major financial institutions were fighting to put up money.” He agreed that “Americans are coming in droves to Panama,” due to it’s political stability, low cost of living, low interest rates, and being located outside of any hurricane path. “It’s great for baby boomers.” Trump said, although the project will be marketed worldwide. The condominium units will start at $180,000 with unobstructed ocean views.

Panama is just beginning to realize a real estate boom!

Besides Trump, many international real estate investors are also discovering Panama.

For example:

Bigger Than Trump: An even taller skyscraper will be built near Trump’s Tower. The Ice Tower will have over 100 floors making it the tallest building in all of Latin America, tied with the Empire State Building as the second-tallest in the Western hemisphere and 9th in the world when it is completed in 2010.

And Another! Even before Trump’s Tower and The Ice Tower are completed, another skyscraper (93 floors) called El Palacio de la Bahia will be completed in 2009 costing over $160 Million. They’ve already sold several dozen condos mostly to Europeans because this is a totally European investor project.

I asked a Panama City real estate brokerage owner, Daniel Hanna (Panama Real Estate Group), what he thought about how the Ice Tower and Trump’s Ocean Club will affect Panama’s Real Estate prices? His response echoes most real estate agents in Panama: “As Panama continues to grow in many different industries, these projects will definitely set a new standard of living in Panama, thus increasing the prices around the entire country.”

So, why are all of these real estate investors coming to Panama?

A little History will help explain these phenomena. Panama has always had a close relationship with the United States, which helped Panama to secede from Colombia in 1903 and was the first country to recognize the new Republic of Panama. The U.S. government built the Panama Canal starting in 1904. Only until the year 2000 did Panama actually take control of its Canal after the U.S. closed all of its military bases and left. People used to jokingly refer to Panama as the “United States of Panama” due to its close ties to the U.S. After the U.S. left, Panama’s economy slumped. Then American retirees re-discovered Panama as a peaceful, safe, and cheap place to retire.

Economical Growth: In 2004, real estate construction activity sprang up in different parts of the country. Mostly retirement communities nestled amongst the many beautiful unoccupied beaches and mountain valleys. In 2005, construction permits rose by 90% while Panama’s economy grew by a respectful 6.4%. The Panama Canal recorded its third consecutive year of double-digit growth in toll revenues. Tourism and financial services also made impressive growth gains.

Americans came back to Panama because of the excellent infrastructure built by the Americans, low crime, numerous English-speaking natives, great Immigration Visa programs; the currency has always been the U.S. Dollar, and great Tax incentives.

The Best Reason is that Panama is so cheap to live! Land, housing, local foods, transportation, leather goods, clothing, and local artisan wares are all far cheaper than anywhere in North America or Europe.

Don’t Take My Word for it. Read what leading experts have to say about Panama’s real estate opportunities.

The NY Times recently wrote: “Panama is increasingly lighting up the radar screens of those searching for an affordable alternative to the more traditional south-of-the-border retreats in Mexico, Costa Rica and the Caribbean, where escalating prices increasingly rival those along America’s own beach fronts.”

Forbes Magazine (July 11, 2005) praised Panama as a recommended “PARADISE FOUND: WHERE TO RETIRE ABROAD” where a U.S. couple “purchased a lot on a hill overlooking a golf course and have built a three-bedroom white-stucco house with a red-tile roof (total cost: about $250,000).” in Boquete. “You can hear the sound of rivers here,” says Janet. “It’s very peaceful.”

National Association of Realtors: Tom Stevens, who is their current President, recently visited Panama and explained: “We’re seriously thinking of investing here. It’s a great opportunity. Prices are what it was like in the U.S. 20 to 25 years ago.”

The London Financial Times wrote in its April 14, 2005 issue that Panama is now passing Costa Rica as the place to invest. “Like Costa Rica, Panama is loaded with exquisite beach towns, has inviting tax and ownership policies for foreigners and a long history of political stability. Moreover, Panama City is an urbane, safe city that has long had a military and civilian US presence because of the canal. A gated-community, three-bedroom luxury home on a golf course in the mountains can be had for $250,000 to $350,000, real estate experts say… Chuck Bedsole, who oversees Latin American real estate for PriceWaterhouseCoopers, thinks Panama is at an earlier stage in the real estate boom.”

Conde Nast Traveler’s October 2004 issue declared: “Panama is the new Central American bargain where the U.S. dollar – the market currency – goes a long way.”

Is it Safe to Buy real estate in Panama? Buying Real Estate in Panama is safe and secure for foreigners. The U.S. State Dept. verifies this by stating: “Titled land, and the process of buying this, is similar in concept to that of the U.S., and land deeds are duly recorded with the Public Registry…”

How Long Will this Boom Last? It’s just starting. Donald Trump hasn’t even broken ground yet.

Daniel Hanna, the Panama City real estate broker, reiterates: “Invest in Panama real estate now before the Towers are completed. Panama will become a hot real estate market because it has so many attractions than just real estate construction. Soon, the world will know Panama for its natural beauty, healthy climates, and charismatic people. Living in this beautiful country is just a benefit!”

The National Geographic Traveler predicted in December of 2004: “Panama is now where Costa Rica was 10 years ago. Panama is getting ready to explode.”

“Boom” I can hear the distant rumbling of a Big Boom yet to come!