If you are looking into investing in an apartment building, you should know that you are delving into a full-time career and not merely engaging in an investment strategy. The reason isn’t far-fetched; you need a deeper level of involvement to succeed.
It is, however, a very rewarding adventure as apartment building investment offers unique rewards not found in its sister niches. Thankfully, real estate crowdfunding platforms have made it easier to add real estate to your investment portfolio.
This article will expose you to the ways to invest in apartments, how to buy an apartment building, the pros and cons of investing in an apartment building, and much more.
Ways To Invest In Apartment Buildings
As with every other real estate investment, there are many ways to invest in apartment buildings. The method you adopt depends on your current financial level and how involved you want to be, among many other factors. The following are some of the known ways to invest in apartment buildings.
Buy It Yourself
This is perhaps the first way to consider when investing in apartment buildings. This will mean you will have to source funds yourself if you already don’t have them. Though this method can be time and knowledge-demanding, it offers great rewards for the investor.
It allows you to make all the decisions on how you want to run the business. Except you are prepared to stomach the mental and financial demands this method requires, you should look out for another option, such as a partnership.
Get A Partner
This might be preferable if you are starting real estate investing. You can pool your resources together and have enough to afford an apartment one person might not be able to fund. This, of course, means you won’t be the only one calling the shots all the time.
Investors who prefer to play a passive role in real estate investing can opt for syndication. The person in charge of the syndication would be in charge of all important choices about the selected apartment building. You need to add your funds to the collection to benefit from any future profits.
Investing in REITs
REITs are companies that manage real estate investments, which usually include apartment buildings. Investing in REITs is more like buying stock in a company. When you invest in REITs, you are not directly investing in the properties but in the company itself.
Investing in Real Estate Funds
Syndications and real estate funds are similar, but the latter is more extensive. These funds require larger minimum commitments and make many real estate investments at once. Additionally, you might not be aware of how your money is used, so learn as much as you can about a fund before opting to invest in it.
How to Buy Apartment Buildings
Starting an apartment building investment is no task for the weak, but with these steps below, you might make the process less stressful. We must, however, state here that you should be sure this niche is the right one for you before stepping out.
Decide On The Type of Apartment Building
This step takes into account several factors such as:
- Your budget
- Purpose of purchase
- Investment method. Are you going solo, or you’re partnering up?
Apartments come in different shapes and sizes. Some are new buildings; others are refurbished. A modern multi-story building in a city may be one example, while another could be a Victorian mansion that has been renovated and divided into multiple flats. Deciding on what type of apartment you want to invest in, your budget, etc., will help streamline your search.
The next natural step is to look for properties once you’ve decided what kind of apartment building you want to acquire. You can conduct your property search using the assistance of a professional or service or combining the two. Joining your neighborhood real estate investing club or group is one way to seek a deal independently.
Make Your Due Diligence
Investors should exercise due diligence and thoroughly investigate the deal before making an offer on any property. The location, the number of apartments in the building, the amenities offered, and the building’s condition should all be considered when buying an apartment.
These factors will make it easier for you to determine how much rent you might be able to charge and how much money you’ll need to put into renovations. Additionally, the general state of the structure can indicate how frequently repairs might impact your monthly cash flow.
Furthermore, the property’s location will indicate any regional socioeconomic elements that may impact the property’s long-term profitability in terms of rental income, occupancy levels, or resale value.
Make Payments And Close The Deal
To determine the worth of the apartment building and make an offer, investors can use market comparisons, potential revenue, and the replacement strategy, in which they calculate the cost of constructing a similar apartment. Once the necessary calculations are completed, you can make payment, collect your papers and seal the deal.
Investing In Apartment Buildings With Crowdfunding Platforms
You can invest in individual properties, especially commercial real estate, through platforms like EquityMultiple and Fundrise. With EquityMultiple, there is a $5,000 minimum investment requirement.
Many platforms, including EquityMultiple, only permit accredited investors to invest in specific commercial real estate projects.
Are Apartment Buildings Good Investments?
To know if investing in apartment buildings are a good investment, you have to consider several factors, one of which is the profit the apartment generates in comparison to the cost. A good apartment building should rake in at least between 7% and 10% of what it costs.
How Much Does It Cost To Buy An Apartment Building?
To cost an apartment building, you must consider its location, quality, age, total square footage, total generated revenue, etc. The more points it ticks off, the more expensive it would be.
In summary, investing in apartment buildings is a career that offers investors special benefits. Although the procedure may appear difficult initially, individuals prepared to be vigilant, exercise caution, and put in the necessary effort are sure to profit from investing in multifamily buildings.
If you are interested in starting a career in apartment investment, you can start with a good real estate crowdfunding platform like EquityMultiple.