fbpx
Real Estate
Everything You Need to Know About Investing in Apartment Buildings
0

An apartment building is a complex that is managed or owned by a single entity. Unlike traditional rental homes, it has multiple dwelling units. In apartment buildings, rents are usually long-term. However, some property owners keep a few apartment units as vacation rentals.

In the beginning, real estate investors prefer to invest in single-family houses. But as they spend more time in the market, they start investing in multi-family and/or apartment buildings. If you have been in real estate investing for quite a long-time, investing in an apartment building can be your next move.

All about Investing in Apartment Buildings

Are Condominium & Apartment Buildings the Same?

No, condominium and apartment buildings are not the same. There is a contrast in property ownership. For example, apartment buildings are owned by a single entity or person. That entity or person will be responsible for paying all the taxes, collecting rents, and doing maintenance tasks. On the flip side, in condominiums, each unit is sold individually, and property tax is required to be paid by each unit owner. Here, unlike the apartment buildings, no one will own the common areas such as the gym, pool, parking area, hallway, and other amenities. Instead, condominium unit owners will form a committee and manage these common areas.

4 Challenges of Investing in an Apartment Building

1.      Requires More Management

As an apartment building owner, you will have to manage multiple units at the same time, and this is not child’s play. Apart from investing your money, you will have to invest a significant amount of time while managing all the apartment units.

If you are new to real estate investing, it will be advised not to start with an apartment building. Instead, you should start with single-family houses, and once you know the property management game, you can move to the apartment building investment.

2.      Low Inventory

Compared to traditional rental houses, the inventory of apartment buildings is very low. Sometimes, you may not find apartment buildings in demanding areas. But if you don’t want the apartment units to be vacant, you must purchase an apartment building where the demand is high.

3.      Difficulties in Loan Approval

If you want to purchase a single or multi-family house, you have multiple options for loans. For example, you can apply for portfolio loans, conventional mortgages, Govt. Mortgage loans, etc. But for purchasing an apartment building, there are only a few. Besides, if you are new to real estate investing, banks or lenders will hesitate to provide you with a loan. They will ask for a huge down payment, and sometimes, loan interest can be a lot higher.

4.      High Maintenance Cost

The maintenance cost of the apartment building is way higher than that of single or multi-family houses. Besides, if students usually rent these apartment units; expect frequent damage in the apartment units.

Conclusion

Investing in an apartment building comes with various challenges. But if you want constant rent every month, there is no better investment than an apartment building.

About author

Richard Nevis

Related Posts

Commercial Real Estate Investing

Should You Trust Online Property Valuation?

Read more
New residential construction home framing against a blue sky

5 High ROI Home Improvements in 2022

Read more
Investing in Apartment Buildings

4 Benefits of Investing in Apartment Buildings

Read more

There are 0 comments