Apartment Buildings

apartment buildings

Apartment buildings is the end goal for many investors who invest in income properties. They contain a lot of rental units and can provide an investor with a stable income. Apartment buildings come in all sizes. There are small apartment building that contain 2 or 3 rental units and there are large apartment buildings with hundreds of rental units. In this text we will focus on larger apartment buildings and when we say apartment building it is to be understood as a large apartment building with 10 rental units or more in it.

Small apartment units can be good investments for income investor that has not yet reached the level that they can afford larger apartment buildings. Small apartment buildings can often be found at relatively low prices comparable to the price of many regular houses.

Buying your first apartment building is a large step and large financial commitment. A lot of investors hesitate to take this step as they are afraid that it might be to early. That they might not be ready. The truth is that no one is ever really ready when they buy their first apartment building. If you have successfully been running a portfolio of income properties you are as ready as you will ever be. If you already have employes than that is a big plus since you will likely need at least a care taker once you purchased your first apartment building.

An apartment building is a large investment and it is very important that you do the math before you decide to invest in one. Make sure that it makes financial sense to purchase the apartment building and that you can cover the monthly mortgage if you do. Do several different calculations based on different scenarios so that you know that purchasing the house is the right choice for you. If you are in a situation where you can contemplate buying an apartment building you have already built a large portfolio of income property. Do not risk everything by being to ambitious. If you are uncertain about whether or not you can cover your financial obligations it is better to wait a couple of years and build a bigger portfolio before you take the step to buy your first apartment building.

It can sometimes be a good idea to reduce your debt by selling a few properties and using the proceeds to pay down your debts before buying an apartment building. Remember that selling properties will reduce your monthly income. It will therefore sometimes be better to keep all income properties and keep your existing monthly income than selling them to pay down debt.. This is due to the fact that paying down debt sometimes have a limited affect on your monthly payments.

apartment buildingAn alternative to investing in apartment building is to invest in companies that are active in that business. There are a large number of companies that invest and manage apartment buildings and that are listed on different stock exchanges. These companies are often good dividend investments.

Investing in a real estate company that invests in apartment buildings will seldom be as profitable as investing directly in apartment buildings. The benefit of investing in stocks instead of directly in apartment buildings is that the risk is lower and that the entry barrier is lower. You need a lot of money to invest in apartment buildings while you can invest any amount in stock.

There are usually smaller unlisted real estate companies that you can invest in if you prefer to invest in the local area rather than in a big national real estate company. Investing in small regional real estate companies can be very risky. It is not unusual that they are controlled by one man or a couple of friends and it is not unusual that the economy might not be as good as the books seems to indicate. Always do your due diligence before investing in smaller companies like this. If possible we recommend that you make an investment that is large enough to give you a better view of what happens in the company and a seat on the board. If you are unable to make a large enough investment to achieve this we recommend that you invest a smaller amount. An amount you can afford to loose.

There are plenty of well managed profitable small real estate companies. Unfortunately there is also plenty of bad ones. This is why we recommend caution when you invest in small companies.