You’ve had some experience with investing in homes, but now you’re ready to take your real estate investing efforts up a notch by taking the plunge into apartment syndications.
The question is, are you truly ready to enter the “deeper end” of the real estate investing pool?
Investing in apartments is a major commitment; in fact, it’s often viewed as more than just a passive investment strategy: it’s a career. To invest in apartment complexes, you’ll likely need more commitment than you would with a single-family home, both financially and physically. At the same time, investing in an apartment building offers benefits that you won’t get with other kinds of real estate investment strategies.
Here’s a rundown on how to invest in apartments like a pro.
Assess if Apartment Investing is the Proper Fit for You
First, make certain that this investing approach is really right for you. This is critical, whether you are totally new to investing in real estate or you already have a massive portfolio of investment homes.
One of the main reasons you need to be confident you’re making the right move is that working with multifamily properties requires two valuable commodities: time and cost. Those interested in mastering how to invest in apartments must be prepared to meet the upfront capital requirements. They’ll also need to become accustomed to managing multiple units simultaneously to generate continuous cash flow.
Some unique challenges that come with choosing to invest in apartment complexes include addressing tenant turnover, maintenance issues, and leasing paperwork. So, before you become involved in apartment investing, make sure that you have an idea of how you’ll secure the capital (whether that comes from financing or private accredited investors) and the schedule required to accommodate such a large endeavor.
Consider Your Target Apartment Building Type
Apartments, much like homes, come in a wide range of sizes and shapes. For instance, if you’re exploring how to invest in apartments, perhaps you’re eyeing a community that is actually a rehabilitated Victorian home that someone has divided into multiple units. Or maybe you’re looking for a modern building with multiple stories located in a metro area.
To make your choice easier, first, determine your target asset class. This will help you narrow down your search for new deals and help you pinpoint what kinds of buildings would give you the greatest return on your investment based on your budget. You must also consider how much you’ll need to charge in terms of rent in light of the property purchase price and the cost of renovation and repairs.
Identify Your Target Property
After you’ve settled on a certain type of community to invest in, you can start looking for properties. As you explore how to invest in apartments like a pro, it may behoove you to consult with experts who have experience investing in apartments, as this may help you to avoid making costly mistakes from the start, especially when it comes to financing (more on that later) and setting post-acquisition income and expense assumptions.
You could also connect with local industry professionals, such as fellow investors, property management companies, or real estate agents, through a community club focused on real estate investing. Networking with these types of professionals may help you to connect with an investor who knows about certain properties for sale. Agents could also point you to potentially lucrative properties, since they can easily access commercial brokerage listings and multiple listing services.
Practice Due Diligence
If you’re interested in learning how to invest in apartments, note that exercising real estate due diligence is one of the most important steps you can take. In other words, you need to analyze a potential deal in depth before moving forward with it.
Your Analysis
To invest in apartment complexes, you need to take into consideration factors like location, available amenities, the condition of the target building, how many units the building has, and the historical and current market rents and expenses. All of this information can help you to calculate what your rent amount should be and how much you’ll have to pay for necessary improvements and repairs.
The building’s overall condition could tell you how frequently you’ll need to perform repairs, which will impact your cash flow each month. In addition, your property’s location will point you to the socioeconomic factors in the local area that will impact your long-term profitability. These factors include, for example, capitalization rate, rental growth, population trends, and occupancy rate.
Other Considerations
Furthermore, to invest in apartment complexes successfully, make sure that you hire a reputable inspector to check out an apartment complex before you buy it. At the same time, you’ll want to secure copies of legal documents, such as leases and tax returns, from the complex’s previous owner. These documents will be most helpful for discovering hidden problems with the property.
Finance the Deal through Syndication
As you explore how to invest in apartments, note that an important part of this process is financing the deal. A smart way to do this is through apartment syndication. Syndication is where you pool money from multiple passive investors and use this capital to acquire a property; you can use the money to purchase an apartment community outright or to cover part of the cost of the property while using a commercial mortgage to cover the remainder of the purchase price.
The benefit of syndication is that it offers a rapid way of purchasing apartment complexes and producing profits from them. The investors with whom you work will cover various apartment syndication expenses, and you’ll receive this money since you’re assuming responsibility for managing the deal.
Master Your Portfolio Like a Pro!
If you’re ready to elevate your real estate investing income, now is an excellent time to learn how to invest in apartments like a pro. Get in touch with me, Joe Fairless, to find out more about how you can make your first apartment investment deal, the first of many successful ones in the years to come.