Apartment Real Estate Investing

By Troy Pryczek



Real estate investing has many opportunities, even in a depressed economy. Many new investors automatically look into the prospects of buying single family homes or land and completely miss the very lucrative apartment building market. Most find themselves intimidated by the prospects though as the details of buying and apartment building are very different than they are with a home or piece of land. Single family homes, comparatively low cost, and apartment buildings are a much heavier investment. Selecting the right apartment building can also be a daunting prospect and the thought of maybe becoming a landlord can be distressing.

There is a fundamental difference however between the two. When you buy and sell a house or piece of land, your profit on that deal is a one time thing and you will have to go look for more deals to continue to make money. With an apartment building, once the deal is closed and your building is occupied, the money comes in on a regular basis for as long as you own the property. If you have no interest in the day to day operation of your property it is simple to turn it over to a management company and let them do the work will you reap the profits.

Here are a few hints and tips that will help you get one step ahead if you do decide to invest in an apartment building.

• First, determine the value of the building by either subtracting the yearly maintenance/upkeep/taxes, and other fees from the yearly rents. This will give you a good estimated value of the property.

• Unless you have a pile to invest you are probably going to need some form of financing. A good credit score will help you get a bank or finance company loan. If you are seeing more than 75% of net operating income per month in rents, you shouldn't have any problem. Private money is also an option and is usually a much easier process than traditional sources.

• Never close any deal unless you have all the numbers. Having good information on the costs of running the building as contrasted against potential profits will allow you to make sound decisions.

• Any property that you are considering should be assessed by a professional building or general contractor. You will have to clean up the building and get it ready for leasing and you will need to know the cost of the repairs and remodeling to factor it into your profit analysis.

Investing in an apartment building can be much more complex than investing in single family homes but the risk is not proportionally larger and the money will continue to come in long after you have spent the money you would have made with a single family home sale.

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