The Best Real Estate Investing Strategies: Part 2 – 7 Things you must know to buy Apartment
Investing in apartment buildings as your real estate investing strategy can be both financially rewarding and incredibly challenging. Unlike wholesaling houses or rehabbing houses, this is a long term investment strategy.
You should only consider buying and holding apartment buildings if you have a substantial amount of cash and liquidity. Is it possible to buy apartment buildings with no money down? You bet it is. However, since you’re financing 100% of the deal, you will likely not have very good cash flow. Then if something major goes bad like a roof or boiler you’re in big trouble. I currently own 150 units and operate a full service in house management team. I’m going to give you — things you need to know to succeed as an apartment building owner and investor.
1. Never buy apartments in bad neighborhoods – Your life will become a living nightmare. Buy in C+ neighborhoods only!
2. Always use an LLC to buy apartment buildings & keep your personal name off of all of the documents (use your attorneys name). Tenants will slip and fall and sue you personally otherwise.
3. Never pay full retail price. The deal won’t make sense as a realtors operating estimates are always extremely low. Look for buildings not listed with an agent. Always include 40-50% operating expenses in your cash flow projections.
4. Invest in your education before jumping right in. Apartment management and investing has many challenges. You need to know how to properly evaluate a deal, how to screen tenants effectively, and all the tenant/rental laws in your area.
5. Pre-screen tenants thoroughly. There are excellent online services that will give you criminal, eviction, & credit history for $20 or less. Save yourself a ton of hassle later and use one of these services! Otherwise it will cost you thousands in lost rents and eviction costs.
6. Hire an excellent leasing agent or property manager as soon as you can. This will make your life much easier so you can focus on doing other deals and the big picture. You don’t necessarily need hire someone full time. You can pay a leasing agent per apartment they rent (half the deposit is standard).
7. Find a reliable maintenance technician to handle all the maintenance calls. This is a customer service issue and will insure your tenants stay happy. This is one of the most important parts of being a successful investor of apartment buildings.
Investing in apartment buildings can be a great long term wealth strategy, but takes a ton of diligent work and effort. Buying apartment buildings is not for everyone. Make sure you think long and hard about both your financial goals and lifestyle goals before becoming an apartment building owner. Happy Investing!
Stephan is a freelance writer, who often writes about cheap houses and rehab houses for sale .
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