Apartments have appealed to many investors over the years, but they are not the simplistic cash flowing investment that many new investors have envisioned. The apartment investment can be a very rewarding or a very trying one, depending on your approach.
Apartment investing can go by several names: multifamily, plexes, multiplex to name a few of the most common. There are different classes of apartments within the industry ranging from A to D. The class is determined by a variety of factors including rents, location, condition and age of the property and several other factors that vary by facility. All can be worthwhile investments IF you approach the purchase of such facilities like any other business or investment decision.
The first two factors you must consider is your amount of equity or cash you have for the deal and your borrowing ability. Commercial real estate financing is much more stringent than buying a house or a car, and with the economy and the banks reluctance to lend it has gotten even difficult but not impossible. It is useful to know that 4 units and under can be financed by a regular mortgage loan designed for Single Family Houses. Please consult with one of our loan specialists for more details if you are interested.
You should have a good understanding of landlord/tenant law before you embark on multi family ownership. You can take classes on this at your local rental housing association or community college. Rental property has a lot of liability exposure but that can be mitigated to some degree by knowledge of the law. In addition, finding a good broker who knows the apartment market and can guide you to a facility you are comfortable with and you can turn into a successful long term investment is a must. If you decide you do not want to take on the rigors of property management, hiring a good property manager can be a good business decision. Again, your commercial real estate broker can be a valuable resource to guide you along on this path.
A good broker can help you with the due diligence on your intended purchase and make sure that you are ready to go forward when the escrow closes and you take over your new facility. If you are interested in buying multi family, please call our office at 503-351-5025.