Real estate investing is still a very lucrative avenue for investors seeking to build wealth and grow their portfolio. If you’re one of the property investors gearing to purchase distressed apartment complexes during this pandemic, you might want to take a moment to read this blog. There are a few things we think you should know before you go ahead and commit yourself to such a colossal investment.
1. Have a clear purpose for the property
Determine your end goal or purpose in investing in an apartment complex. How does this investment fit into your long-term vision? Do you plan on building equity or are you looking for immediate cash flow from the property? Is this a property that you intend to simply fix up and resell or refurbish and refinance?
2. How you plan to finance the purchase
Apartment complexes are typically buildings that contain at least five units. This type of real estate can be expensive. How will you pay for the property? Are you looking at a ‘nothing down’ offer or will you pay a deposit upfront? Can you secure a loan from a financial institution or will you approach private investors for hard cash? What interest rates can you afford and what would be disastrous for you?
3. The property’s potential price appreciation
When investing in an apartment complex it’s always good to keep the bigger picture in mind. A property that offers healthy appreciation and profit is a welcome investment. Ideally, you should be looking at a property that you will hold onto for at least 10 to 20 years. Aim for complexes that have a 5 to 7% annual appreciation rate. A strategy to employ when searching for such properties involves the study of neighborhoods and city trends. Avoid areas that are in decline or appear to be heading in that direction.
4. Your risk tolerance level as an investor
Investing in family homes is different from owning an apartment complex. While it is good to anticipate the best, one should always be prepared for the worst. A great investment is often accompanied by great risk. Your risk tolerance will guide you in the type of complexes to invest in. If you’re risk-averse you might want to stay away from stigmatized properties. But if you’re up for a challenge, you may be the kind who is ready to invest in a run-down property that would thrive after a refurbishment.
5. Distressed properties aren’t always a complete write-off
When hunting for apartment complexes ask yourself if you are willing to take on a distressed or troubled property? These are the type of properties that may oftentimes be undervalued because of perceived problems. Perhaps maintenance has been severely neglected or the area is in decline. If you have enough time, resources, and interest you might discover a one-of-a-kind stigmatized property that’s not quite a complete write-off.
6. Financial statements aren’t always truthful
It is not unheard of to find falsified financial statements when properties are being sold. It takes a trained eye and an experienced realtor to see right through such unscrupulous practices. If the figures seem too good to be true it merits a closer examination. Again if the profit-loss statements don’t seem to add up, this might be a property you don’t want to get yourself involved with.
Hire the right property managers for your apartment complex
Investing in an apartment complex is the first step to growing your portfolio. Hiring a qualified property manager will guarantee the efficient management of your investment. PMI Colorado Front Range is one of the leading residential and commercial property managers in Longmont. Contact us for more information.
