If there is one thing that can be said about apartment complexes for sale, it’s that there are at least two views on whether they are a good investment. The thing is though, that all apartment complexes are different – meaning that there is no one rule for investing in them. The differences begin with the old ‘location’ issue, and end with the age and condition of the building housing the apartments.
A lot of investors like the idea of buying apartment complexes because they generally offer a good return on investment. As the regular real estate investor works on numbers – this means that the yield that they receive from the complex in terms of rent is enough to pay the costs of having the investment. Ideally, there will be enough left over to see a healthy profit fall into the investor’s pocket with a positive cashflow apartment complex – but that’s another argument.
Apartment complexes for sale: the good and the bad
Honestly, there are some great deals out there for entire apartment buildings for sale – but there are also a bunch out there that do not offer value for money. Whatever investment strategy you use, always remember the rules that you adhere to relevant to your business plan.
For example, our investment strategy revolves around a buy and hold strategy – not so much for capital gains but more for the rental income. For this reason our criteria for the locations we purchase real estate in will be different to a lot of other investors. We look at factors such as rental vacancy rates in the area, yield ratios and the level of existing and planned infrastructure for the area the apartment complex for sale is situated in.
If all that is fine, and only then, do we look at the actual building and the apartments themselves. Importantly, we look at the current tenants, and historical vacancy rates, condition of the apartments and the efficiency of management. We don’t do the management of apartment complexes ourselves, we would much rather leave that to professionals. That way we avoid the late night phone calls for emergency repairs and don’t chase people for late rents when required. We find that the piece of mind that a good property manager provides is well worth the fee.
The reason people look at apartment complexes for sale when looking for a property to invest in is generally because they offer such excellent returns in relation to the initial investment. For example, you could buy two nice four bedroom houses in our area for the same price as a block of four or five apartments. The only thing is that the apartment complex will return around 25% more money month on month than the two houses.
The key here is that you are looking for a good investment, not a ‘nice’ piece of property for your portfolio. It’s much better to have a bunch of financially successful properties than a few ‘nice’ ones that don’t perform as well. Investing is a business, and this must be remembered when you are looking at apartment complexes for sale. If the apartments are not up to scratch, do a few minor renovations after purchase to keep the tenants happy – and in place. This not only means that you keep the good tenants in your apartment paying off your property, but also that you will see an increase in the value of your property.