When it comes to finances and investing, Marko Vrzic, founder of Vrzic, a New York-based real estate investment company will tell you to “stop trying to save for your dream home”. While there are a number of ‘rules’ that we have been told all of our lives are the keys to success; spend less than you make, watch your credit score, and get a mortgage. For a long time, many of us accepted these rules as fact despite some evidence to the contrary.
This is especially true for the mortgage tip; in many countries, working-class people being able to afford a mortgage was a mark of national success and for young people, being able to buy their own home is a dream and as Marko states, “your dream home is simply based on your cash flow, increase it and your dream home will change”.
The Problem With Real Estate
But this dream often falls short of the lofty promises it makes. Those aspiring to own a home often envision that they will sign up for a mortgage, pay it off in 20-30 years and have that home as a piece of generational wealth to be passed down or sold for a profit. The reality is that this often does not happen.
First, homes are expensive assets to own as they attract property taxes, maintenance costs, insurance, and so on. Furthermore, the value of single-family homes, in particular, have been found to not fare very well long-term, especially in unforeseen circumstances like the current global pandemic and the housing market crash of the last 2000s.
Essentially, houses as an asset might not be all that they’ve been cracked up to be. However, one firm, Vrzic, is working to change this through multi-family property investments. The reason that this solution is being put forward is that multi-family properties have been found to be more resistant to economic and social upturns and more stable in terms of a return on investment.
On the other hand, Vrzic has provided a comprehensive breakdown of how the single-family property is less of a secure vehicle than previously thought. Consumers, facing a crisis with inflation, a mismatch in labor compensation and cost of living, and a global pandemic, often see buying a house as a last-ditch effort to hold on to the stability of old times and stay afloat.
A New Solution to an Age-Old Problem
According to Marko, the current real estate system is not becoming more flawed but was designed this way from the start, saying that it “has brainwashed society, making them think that they’re creating wealth for their grandchildren while losing money”.
In the years it takes to finish paying off a home, families often end up burnt out should they fall on hard times, lose the home altogether as well as years of investment. His solution is the concept of multi-family property investment.
Multi-family investments essentially involve the clustering of multiple housing units into a single ownership. The combining of investments goes a long way to save time and allows for reduced paperwork and more time to expand their efforts into other investment opportunities. This, in turn, means that investors can focus on building more wealth.
This is particularly beneficial for middle-class investors as banks are known to offer the best deals to high net worth clients, leaving the middle-class with less profitable rates and options. Thus, Vrzic’s strategy gets around this by allowing middle-class families to pool together resources and then benefit from a larger capital pool for the good of all.
The units that are purchased are not subject to the whims of a single family and thus, collective decisions can be made on how to increase property value without having to deal with issues from neighbors. This is a process known as ‘force appreciation’ and can only be achieved in a situation where the owner of the asset has sole control, such as in the case of multi-family properties.
Additionally, those who invest in these properties can see a return on their principal faster and make back enough to invest in other ventures as opposed to waiting for years for a payoff that might never come. As Marko puts it, “money in a bank should only be used to buy real investments or pay other expenses needed in order to generate a positive cash flow”.
Finally, Marko recommends that investors source as much information as they can and especially watch how the wealthy are operating. Middle-class people are often stuck in the same cycle of decades-long mortgages while the wealthy consolidate resources to make more money in the long run. Marko’s final advice is, “cleanse yourself from misinformation and start doing what the wealthy have been doing all along”.
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