Apartment Real Estate Investing

Invest in Apartment Buildings

Apartment real estate investing can be a great way to make a lot of passive income. In fact if you invest in apartment buildings it can substitute your day job’s income even faster than investing into rental properties.

Why is buying apartment buildings even more powerful than buying rental properties?

If you buy a house for $100,000 you might be able to rent it out for say $700. But if you buy an apartment for $1,000,000 it would give off a considerably higher income because you can rent out each and every room separately.

If you rented out 15 rooms in that apartment building for $600 a month it would give off $9000, which is a lot more than if you had invested that money into 10 rental properties instead.

Apartment real estate investing is also more stable than buying rental properties. If you buy a rental property and your tenet moves out that vacant house is going to eat you up alive.

However, if you bought an apartment building with 15 tenets and one of them moves away that is going to hurt a lot less. If the property is a really good investment you could have a few vacancies and still have positive cash flow.

What to Look For

Of course you want to find properties in good neighborhoods that are giving off a nice cash flow.

But there are other things to look at, such as the CAP rate. The Cap rate is pretty easy to understand, the formula looks like this.

Cap Rate = Net Operating Income/Purchase Price of Property

The higher the Cap Rate the better of an investment the property is. Usually a Cap Rate above 10 is considered to be good, but this is pretty subjective.

Another thing that can be important is how high the rent is compared to the rest of the neighborhood. If the apartment building is renting out for $600 a month but every apartment building around it is renting out for $700 a month that can be a good sign because you might be able to get away with raising the rent a little, especially if you do some work to make it a little nicer to live there.

Expenses

If you want to invest in apartment buildings you are going to need to have some money lying around. Typically banks want you to put more money down for an apartment building then for a rental property. You will probably have to come up with a 20-30% down payment in order to get a loan.

In addition to that it will be much easier to get a loan for a building that is cash flowing then one that has potential. So do your homework.

There are other expenses that come with running apartment buildings such as.

• Loan Payments
• Commercial Insurance
• Property Management Fees ( Mgmt Companies Usually charge around 10% of rental income)• Unexpected Expenses

The idea is to get into a property that will pay for all those expenses and still cash flow at the end of the day. So do your homework beforehand.

Apartment Real Estate Investing can be pretty expensive, but you may only need to get into one or two before you could live off of it, especially once you have paid down the loan a little.

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