I could write a long column about the various types of investment properties but instead I’ll discuss a fairly common and attainable investment for most people – a multiple unit apartment building. Traditionally, these types of investment properties have fared well in the market compared with commercial, industrial and office buildings. Banks like to finance apartment deals and can be very aggressive with their lending policies because, unlike the other properties, vacancy rates are traditionally low and yields are reasonable. Furthermore, in less-than-robust economic times these properties will stay fairly full while still providing adequate investment yields. As one banker told me, “People have to live somewhere.” Here are some factors to consider when investigating the purchase of an apartment building:
As with most homebuyer, quality tenants look for a location that is accessible to amenities such as transit, schools, work and shopping. Ask yourself what kind of tenant you want to attract and then look for a location to suit.
Astute realtors who understand investment real estate will tell you to never fall in love with bricks and mortar – it is cash flow that counts. This may be acceptable as a general buying principle however when you’ve found a property to buy it is very important to look at the bricks and mortar to ensure that the property has been maintained. What good is a building that provides a decent return if you have to walk in and replace a roof or furnaces or windows or upgrade the electrical? Hire a really good inspector to look at the building. In some cases, you may wish to hire a series of qualified experts. Whatever you do, do not go cheap on a building inspection, it will come back to haunt you. Trust me on this.
Make sure to come back next week for part 2 including Market Rents, Vacancy and Income & Expenses. If you have any questions please email us at firstname.lastname@example.org