You may hear about all of the benefits of investing in apartments but is it right for you? While there are a lot of different options for making money that may seem attractive -- not all of them are suitable for every investor.
Before you take the dive and put your money into apartments, you need to make sure that you understand what you're getting into when you get going. Continue reading this article for 6 things you have to know before you start apartment investments.
What You Need to Know About Investing in Apartments.
From apartment security to what color of paint you put on the walls, there is plenty you need to think about. We don't want to overwhelm you but we need to bring these following things to your attention.
1. Bad Location - No Good
If you think that you can make a bad location work with a little extra paint - think again. If the location is bad, you're not going to be able to attract high-quality tenants.
When your apartments are in a location that attracts less than desirable tenants, you will have problem after problem. You'll deal with evictions, domestic violence, and property damage more than if your apartments are in a prime location.
You will surely notice that you have to pay more money for a location that is an optimal one vs one that is a little sketchy. Stomach the costs if you want a good investment and stay away from properties that you wouldn't let someone you know live in.
2. Property Management
Before you decide you want to put your hard earned money into this apartment complex, you should look into how the property is managed. If the property isn't managed well, the current residents aren't going to be happy about changes you might want to implement in most cases.
On the other hand, if the property is poorly managed and you see there are more opportunities for income, you could get the apartment at a good rate and spruce it up to get the income that you want.
Think about laundry service, storage, vending machines and other services that tenants might be willing to pay for.
3. Rented vs Not Occupied
When you look at the number of units in the apartment, how many of them are rented how many are not occupied? You want to find an apartment that has an occupancy rate of 70% or above -- or walk away.
You might think that you can find plenty of people to move into your apartments so you decide to buy an apartment that is only occupied by 50%. If you do this, you're going to have to make it a full-time job to get those numbers up or your apartment complex is going to cost you major money instead of bringing in profits.
4. Is the Seller Motivated?
As you're looking at different apartments, check to see if the seller is motivated. Sometimes the only way that you can do is by talking to them personally to see what vibe you get off of them.
You may also hear that they are going through a divorce or some other difficulty. If that is the case, they may be willing to take a loss on the property to get it off their hands.
A motivated seller is often your biggest opportunity to get an apartment dirt cheap. Don't be afraid to play hardball so you can get the price that you want. Never say how much you're willing to pay before they show their hand first.
5. No Total Rehab Apartments
As you're looking for apartments to buy, you may have found a good deal -- but it's almost too good to be true. Make sure to look at the apartments and make sure they are not total rehab apartments.
While it is fine to do some work on apartments, if you have to do too much work on them, you may not get into profit for quite some time. Besides for the amount of time that it takes to get into profit, you never know how long it can take you to finish all the work that needs to be done.
Ask a contractor about the work you see that needs to be done and show them the inspection reports for further help.
6. Can You Verify All Financials?
As you're going over the deal with the owner, you need to see and verify all of the financials. You should have your accountant, financial advisor, and lawyer go over any of the necessary information.
If you don't verify all of the information properly, you might buy an apartment that you regret having.
They should have the following on hand. You should be able to see records for a 12 to 24 month period.
Being able to see each of these things will enable you to make your decision much easier. If you see something that concerns you, don't be afraid to ask them to clarify what is happening.
There are plenty of deals available but if you get stuck with a loser, it is going to be difficult to get it off your hands. The more due diligence you can do before you get started, the easier it is going to be to pick a winner.
Learn More About Real Estate
Now that you know more about what's important when you're investing in apartments, what else do you want to know? We have a section for both international and domestic real estate so make sure to check those out today.