Investing is a way to make your money work for you. Buying an apartment buildings has been a winning strategy for many throughout history. This type of real estate investing is profitable because it provides a good return on investment most of the time. Until today, there is still a need to invest in this kind of property whether it’s for you and your loved ones or for your business. Here are the things you need to know about investing in apartments.
This article will cover the three most effective strategies you need to consider before buying your own apartment building. There are many ways to invest in apartment buildings. These include investing in a REIT, investing in a private fund, being part of a joint venture, buying your own building
An apartment building has a lot of operating costs, and if you’re looking to make money investing in apartments, you need to be able to cover those expenses with the rent you collect. The more units a building has, the more money it takes in, so bigger is usually better. You want your investment to appreciate, but you also want it to be cash-flow positive.
Here are three of the most effective strategies to make money investing in apartments:
- Identify Affordable Housing Markets
Affordable housing markets allow you to buy rental properties at a significant discount compared to similar markets. For example, if you were to buy a four-plex in southern California, it would probably cost more than $700,000. If you were to purchase the same four-plex in Pine Bluff, Arkansas, the price could be less than $200,000.
TIP: The million-dollar question is “How do I find affordable housing markets?”
There are two ways to identify affordable housing markets: looking for distressed properties or spotting trends and identifying areas poised for growth.
If you’re looking for distressed properties, you should start by identifying neighborhoods with high crime rates, high foreclosure rates, and low-income levels. These neighborhoods are likely to experience a lot of new home construction in the next five years as investors gear up for rehabilitation projects. When this happens, the demand for rental properties increases, and rental rates increase as well.
The second way to identify affordable housing markets is by identifying trends and potential growth areas. For example, in 2006 there was an explosion of foreclosures and vacant homes in Florida due to Hurricane
- Buy up-and-coming neighborhoods
Another strategy is to buy up-and-coming neighborhoods instead of established ones. The idea behind this strategy is that you’ll be able to reposition the property by investing in renovations or upgrades as the neighborhood improves over time without needing to raise rents as much as you would otherwise need to do so. This strategy requires more work than simply buying into a hot market, but it can pay off if done correctly.
- Buy distressed properties
Finally, one of the most effective strategies for making money is to invest in distressed properties—that is, properties that are currently owned by lenders after having gone
Advantages of Buying an Apartment Buildings
Investing in apartment complexes can be a great way for investors to build their portfolios and their income streams. It is a form of real estate investing that many people don’t consider, but it can be a great way to diversify your investments, grow your net worth, and create steady cash flow. Investors who are looking to buy apartments for investment should consider the following advantages:
- Diversification
Investing in apartments is a great way to diversify your real estate portfolio. In addition to buying single-family homes, duplexes, and other forms of residential real estate, you can also diversify by buying an apartment and renting it out. Many investors choose to do this because they feel it gives them an opportunity to have a steady rental income while also giving them the opportunity to see the value of their property appreciation.
- Appreciation
You can often see higher rates of appreciation when you invest in apartment buildings than you would see with other forms of real estate investing such as single-family homes or duplexes. This is because these buildings tend to provide higher occupancy rates as compared to other kinds of properties.
- Cash Flow
Most apartment buildings need some form of upkeep so there will always be some sort of maintenance cost associated with the building. Factor in the monthly mortgage payment and determine if the actual rent collected can support the total cost to operate the property.
Read More Why Should I Invest in Apartment Building – Growthcapitalgroup
Conclusion:
The market is there, but you will have to do your research. You will be able to make money, but you cannot make a killing. A good investment opportunity that is not right for everyone but perfect for people who want to take on some risk and in return get some good returns well into the future.
Authored by:
Mike Desrosiers
Founder | Growth Capital Group
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