Buying Apartment Buildings For Dummies
For most new investors, buying an apartment building might seem like a daunting task that's too difficult or expensive to achieve. I used to think that myself, until I closed on my first 12-unit apartment building. I realized that the whole processisn't much different than the process I'd already learned to buy a smaller rental property. The biggest benefit is the scale. With one purchase I was able to double my portfolio, while buying an asset with many tenants to mitigate the riskof a few vacant units hurting my cash flow.
buying apartment buildings for dummies
The average cost of buying an apartment building depends on what you define as an apartment building. If you consider buying a duplex, triplex, or fourplex an apartment building, then the average cost goes down drastically. In my market I can buy a fourplex that cash flows for around $100,000. And if I was willing to live in the property, I could use an FHA loan and house hack by living in one of the units for only 3.5% down.
Apartment complexes can be tens of millions of dollars or more if you're buying huge high rises with hundreds of units. However, there is a middle ground of smaller apartment complexes that are bigger than a fourplex but still affordable enough for most investors.
In short: Apartment buildings in general are good investments, but not every individual apartment building is a good investment. Would-be investors must exercise caution when evaluating a property and take into account many factors, including the condition of the property, price relative to other similar properties, local real estate trends, and rental vs. ownership demand in the area. The easiest way to do this is with a rental property calculator that lets you forecast the returns you can expect from purchasing a particular apartment complex.
Get real estate software: You can sign up for real estate investment software that focuses on helping investors buy off-market properties. Apps like DealMachine are useful tools for investors looking to find apartment buildings to flip, BRRRR, or wholesale.
There are quite a few types of apartment buildings: high-rises, mid-rises, garden-style, and walk-ups, among others. Make sure to evaluate the current real estate trends in your area before deciding which type to buy, since popularity varies by region. Your real estate agent can make recommendations based on what they see in their day-to-day work.
Upkeep expenses can take a big bite out of your bottom line. Prior to buying a complex, look up the local going rate for some of the most common renovations, like repainting the exterior of the building and the interior of the apartments for when tenantsmove out.
Working with a real estate agent is the best way to find apartment buildings for sale. They can use their professional network and the MLS to monitor new listings and alert you of suitable properties for sale. Besides a real estate agent, you can find listings in the local paper and online.
Buying an apartment building is likely to seem like a daunting task for many. This is especially true for beginner investors. Real estate investors of all experience levels have grown their wealth exponentially by buying apartment buildings, and you can too.
The biggest benefit of buying an apartment is its scale. With a single purchase, investors are able to double their portfolio. With so many tenants, they are also able mitigate the risk of vacant units without interrupting their cash flow. While the risk of buying might seem big initially, it is quite the opposite longterm.
The more units the building has, the more expensive it will be. For example, a huge high-rise with 100 plus units will cost tens of millions of dollars or more. Luckily, there is a nice middle ground of apartment buildings that are smaller than a high-rise but larger than a fourplex. These apartments will likely cost between $500,000 and $1 million.
One of the top tips for any beginner investor looking to buy an apartment building is to partner with an experienced agent. When it comes to apartment buildings, the best properties rarely ever hit the market and are instead sold by agents through private connections.
Considering apartment buildings are an expensive venture, why not save money if you have the opportunity? If a $400,000 single-family home can reward a buyer with a $6,000 refund, just imagine how much you could get back with a large, multi-unit property. Contact us today to start your apartment buying journey.
The first step in buying an apartment complex is to learn about the different types of apartment buildings so that you can decide which is right for you. You'll need to consider your goals and what you want to achieve to ensure the apartment building you buy can meet them.
Once you have a budget, a target market, and a cash flow forecast in mind, you will want to start getting pre-approved for financing. Securing financing is one of the most important aspects of buying an apartment complex, so be sure to take it seriously, and prepare all the paperwork your lender will ask for, including detailed financials.
The first thing to consider is whether buying a specific apartment complex is a good investment and if you have time to manage the property. Owning a few small rental properties are easier to manage, and tenants are easier to work with on a 1-to-1 basis. With an apartment complex, there are more potential vacancies and large scale problems you might face.
Generally speaking, most apartment buildings are a good investment. However, not every building is automatically a good investment. Each should be evaluated separately. You should consider things such as age, condition of the property, price per square foot (compared to the rest of the market), and the local real estate market. Knowing how to calculate price per square foot, cap rates, and how to search for comps is critical.
The downside is that apartment buildings tend to require a hefty down payment. Buildings are usually much more expensive than the average house. This makes a 20% down payment significantly more expensive as well. You should expect to make a down payment of over $100,000 as even the most affordable buildings with just a few units will cost over $500,000.
Over the last 12 months, the average sales price for an apartment complex was $1,598,091. However, the median sales price was only $238,400. This means that a lot of apartment buildings are generally affordable for beginning investors. You will not have to spend millions of dollars to get started, although that option is likewise available to you.
Over the last century, countless real estate investors have grown their wealth exponentially by buying apartment buildings. But, before they became successful investors, they all started as beginners, eager to purchase their first multifamily property.
Most people purchasing a single-family home will do so through a real estate agent; and, similarly, most investors buying an apartment building will want to work with a commercial real estate broker. A good commercial broker can help you identify quality apartment properties in your area, will have a good understanding of real estate investment fundamentals, and may even be able to help you negotiate on the sale price.
Plumbing Issues: Plumbing can be yet another issue faced by the owners of older apartment buildings. Repairs can be expensive, and additional contamination issues may arise if the building has lead pipes.
Multi-unit buildings lower risks since vacancies are less impactful, and property maintenance costs can be spread across multiple singular units. However, learning how to buy an apartment complex is inherently more complex (no pun intended) and significantly more expensive than buying a single-family property. Plus, the costs and maintenance requirements are much higher.
The real estate sales and brokerage industry undeniably provides access to the largest body of residential and commercial properties for sale, including apartment buildings. Real estate salespeople have access to one or more local multiple listing services (MLS), listing all the properties for sale by every agency in the area, including multi-family and apartment complexes. The most dedicated real estate agents have rich expertise in the local market, plus skills and resources to find and evaluate data on apartment buildings in your area. 041b061a72