First Things First . . . Why Apartment Buildings?
Keywords: Apartment Investing, Commercial Real Estate, Real Estate, Apartment Buying
Apartment investments provide low risk compared to residential investing. A $250,000 home can rent up to $2500 a month. While a $250,000 10 unit apartment building at $500 per unit can rent for $5000 a month. If your tenant moves out of your home, all cash flow is immediately gone until new tenant is found. It would take all of your tenants to move out of your Apartment Building. Short-term leases allow the potential for increasing income as the market rises. Apartment investing may produce both cash flow and equity appreciation returns. In many areas single-family home prices are often beyond affordability for a majority of the population, which make apartments a permanent necessity.
How much cash/equity is required to get started?
The average down payment required for investing in apartment buildings is anywhere from 0%-30% of the purchase price of the building depending on your knowledge. The lower the amount of your money you invest in an apartment can change the risk associated with an investment and explode your returns on the investment. There are tricks of the trade on how to buy apartments without using any of your money or credit.
How do I qualify for a loan for the balance of the purchase price?
The building qualifies for the loan; it has nothing to do with your personal credit, employment, or financial statement. You just provide additional security to the lender. Most lenders for apartment buildings require you to personally guarantee the loan; however, they won’t issue the loan unless the building generates sufficient cash flow and provides a margin for error. Lenders have a lot to say about how much cash is invested in an apartment offering.
How do you manage the investment?
It is not recommended that you manage any property, however, there are some people who prefer to manage their properties themselves while others feel their time is more productive elsewhere and turn the management of the property over to a professional. A basic rule of thumb is that any building with 20 or more units will support the cost of professional management and a live-in manager. A 10 to 20 unit building will usually support a live-in manager only who will perform routine maintenance tasks, leasing, and banking. So, the larger the building the more management you can afford. Professional management companies are plentiful and there are ways for you to find the right one for your property and screen out the bad ones.
How do you analyze a possible investment?
This part can be very complex to a beginning investor or someone who has never invested in apartment buildings. This detailed analysis, is commonly referred to as the “due diligence”. Main factors will include at least the following: gross rental income, vacancy loss, operating expenses, debt service, and cash flow. The object of the detailed analysis is to get the understanding of the likely performance of the investment and to identify areas of concern.
You can replace your income with one deal - Financial Freedom
Apartments are the fastest way to leaving your (J.O.B.) ‘Just Over Broke’. It is one of the only businesses that you are literally one deal away from retirement and the fastest way to build wealth than any other real estate business out there. Commercial real estate investors play by a different set of rules slanted in their favor and designed to make them rich.
David Jackson is a real estate investor & author who has found a niche in apartment investing. Find out how you can buy apartments while being broke & with no money of your own at www.mymassivecashflow.com. Register for his newsletter & claim a CD at www.freeapartmentbuyingtips.com
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