Are you thinking about investing in apartment complexes?
Now is the perfect time to invest in an apartment complex because the demand for rental properties has never been higher, and money has never been cheaper.
If you’ve never invested in an apartment complex, or multi-family property in the past, this article will provide you with 6tips first successfully investing in an apartment complex.
Tip #1 – Choose The Right Location
The first thing to do before investing in apartment complexes is to choose the right location.
This step should be considered to be essential because the rental market in the United States has changed over the last 12 months due to rent control in States like California and Oregon, followed by economic instability, rioting, and other societal/economic issues.
Cities like Minneapolis, Seattle, Portland and Chicago have seen dramatic changes this year and should invested in with caution considering that the social unrest in these cities is showing no sign of slowing down.
What classifies a city as being a great location for investing in an apartment complex?
This is a great question to ask. Some of the things that I look for before investing in an apartment complex in a city include low unemployment, low crime rates, steady job growth, easy access to public transportation, things to do in the area, shops, stores, restaurants, and a good public outlook regarding the area’s future.
Thanks to the internet, you can easily research a city online and find feedback about that city written by people who live there so you should not hesitate at taking the time to thoroughly research a location to confirm that it’s going to be a great place for investing in an apartment complex.
Some of the top locations in 2020-2021 for investing in multifamily in the United States include:
- Colorado Springs
Tip #2 – Establish A Target Building Type
One of the great things about investing in apartment complexes is that they are very similar to investing in single-family homes because apartment complexes come in a wide variety of shapes, sizes, and asset classes.
Ideally, when searching for apartment complexes you should choose buildings that have a mixture of 3 bedrooms and 1 bathroom per unit.
This is important because investing in an apartment complex that offers more than just one and two-bedroom units will give you more flexibility and it will also make your apartment complex more attractive to a wider pool of renters in the area.
Since it’s your first apartment complex, you may want to consider investing in a building that has 12 units because smaller apartment complexes are easier for first-time investors to manage themselves and it’s possible to make a nice return on your investment from a smaller building.
Determining the type of apartment complex that you want to invest in is important because it’s also going to provide you with insight into how much you need to charge in terms of the rent and the amount of money that you’re going to have left over for repairs and renovations.
Once you determine the type of building that you would like to invest in, the next step is to think about the ‘class’ of multifamily property that you would like to purchases.
Multifamily Property Class Types:
There are several classes of multifamily property to choose from including Class A through C.
Class A properties typically have the most amenities, features and benefits, Class B buildings have slightly less amenities and Class C properties often have just a pool, laundry room and covered parking for tenants.
It’s been my experience that during times of economic uncertainty it’s best to have Class B properties in my portfolio of investment properties because it’s not uncommon for renters to downsize from Class A to Class B properties.
There are also some excellent Class C properties on the market as well today too so as a general rule, you shouldn’t hesitate to have a diverse portfolio of each property type because you want to have the ability to take advantage of every economic opportunity and own properties that are always in demand by renters.
Tip #3 – Determine The Size Of The Building That You Want To Invest In
Determining the class of the multifamily property that you want to purchase is important but what’s also equally important is choosing a property that’s the right size.
Many investors get started by investing in large multifamily properties right away and they burn out quickly because those buildings come with a lot of responsibilities.
If you’re just getting started in multifamily, it’s may be best to start with a smaller building like a duplex (two units), triplex (three units). Going with this strategy will help you to gain the experience that you need in multifamily properties and avoid getting overwhelmed with all of the responsibilities that comes with owning them.
One benefit that comes with owning smaller multifamily properties is that you may want to consider living in one of the units because this will also help you to eliminate your housing costs as well.
“House hacking” is one of the most popular trends among multifamily investors because it enables them to get started investing in multifamily on a small scale while still enjoying all of the benefits that comes from owning the property.
Regardless if you start with investing in a small or big multifamily building, you should also pay close attention to the number of rooms in each unit.
Ideally, your goal should be to invest in a multifamily property that has at least 2-3 rooms in each unit. This is important because two bedroom apartments are often in more demand than studios and they rent for more money so it’s best to stay focused on finding multifamily properties with more rooms per unit.
Tip #4 – Do Your Due Diligence
Due diligence is essential, especially when investing in multifamily properties because there’s a lot of money on the line.
You should take your time to thoroughly research a deal before investing in it including paying close attention to the condition of the building, location, and how many available amenities the property has.
You should also take the time to consider the current market rents, expenses, and the historical rents for the property as well.
Taking your time to do your due diligence is going to help you to also calculate what you should charge for rent, and how much you may have to pay for repairs or improvements to the property.
During the process of doing your due diligence, you should be up front with the current owner of the property and ask them for all financials that have been associated with the apartment complex from the past several years. These financials should include income statements, rent rolls, and other expense statements.
When viewing the financials from the current owner, don’t hesitate to question if the information that the information given to you is factual, or incomplete.
It’s also important for you to request a complete list of all maintenance activity during the years that the current owner has owned the property because you want to verify if they’ve deferred any maintenance that you are going to be responsible for taking care of after you purchase the property.
Tip #5 – Talk With The Current Tenants
Since you’re going to be investing in a place where people live, it makes sense to interview the tenants that are currently living there to verify if they’re happy with your apartment complex.
Sadly, many investors who invest in apartment complexes make the mistake of not speaking to the tenants. Don’t let this happen to you.
Make sure that you take the time to talk to the tenants who live in the apartment complex because this is going to give you some insight into what’s going on with the property including if any maintenance issues have not been dealt with, and if the tenants are really happy living in that space.
Your goal has an investor should always be to offer better service and support than the previous owner of the property because this will ensure consistent paying, long term tenants.
Tip #6 – Learn More About Why The Seller Is Selling
Besides talking with the current tenants, the next thing to do is to find out who the current owner is and learn more about why they are selling.
Learning more about the seller is important because, learning more about their motivation might open the door for greater cost savings, especially if you find out that they need to sell the building fast and would consider a reasonable offer.
Let’s say that you can’t find the owner of a multifamily property that you’re interested in purchasing. No problem! One of the great things about this day and age is that we have a variety of tools at our disposal to do a little detective work.
To find the owner of a multifamily property, you should search public records or tax accessor records online, check the registry of deeds, visit the building department to view their records or connect with the local chamber of commerce to see if they have any information about the owner.
Tip #7 – Submit Your Offer
If after doing your due diligence, and speaking with the current tenants who live in the property, you decide that it’s the right apartment complex for you, you shouldn’t hesitate to submit an offer on the property.
A word of warning, if you decide to make an offer on the property that’s below that asking price, make sure that you share with the owner specific facts about your offer including comparable sales data, a change in the local economy, or an issue with the building that’s the reason behind your low offer.
Providing the seller with plenty of data backing up your offer is important because, you also can’t assume that their broker is going it articulate your position as a buyer very well so you always want to give the seller a well-written email, or letter, that provides them with plenty of data backing up the reason why you submitted the offer that you did.
Tip #8 – Hire A Property Management Company
Let’s say that your offer is accepted, in this case, it is important to remember this moment and have a mini celebration, then quickly move on to hiring a property management company to manage your new apartment complex for you.
Just because it may be an apartment complex that’s as little last 12 apartments doesn’t mean that you should go gung-ho about managing that property yourself.
Hiring a property manager will save you a lot of time and help you to focus on moving on to your next rental property instead of getting wrapped up in all of the day to day decision making when it comes to managing that apartment complex all on your own.
Once you hire a property manager you will also have peace of mind because they will handle all of the day-to-day tasks of managing a multifamily property including rent collection, maintenance, customer service, tenant screening, accounting and more!
I personally wouldn’t hesitate to hire a property manager to manage each of my rental properties because my goal is to earn passive income with my properties.
Some investors may tell you to manage your properties yourself but the reality is that DIY management is never a good idea because although it may save you a few hundred of dollars per month, you’re spending more time managing your properties than growing your portfolio of investment properties.
Contact Trier Capital
Trier Capital is a private equity firm that makes it easy for you to passively invest in lucrative apartment building syndications.
We save investors the time, money, and hassle of investing in apartment complexes themselves. This enables investors to live life on their terms without having to get wrapped up in sourcing, acquiring, and managing multi-family properties.
Over the years that we’ve been investing in apartment complexes across the United States, our company has developed a system for multifamily investment.
Why do everything yourself? Work with a proven system that will help you to enjoy passive income and excellent ROI from multifamily properties.
To learn more about the benefits of partnering with my company, contact me today by calling or click here to connect with me online.