May 25, 2024


Mad about real estate

Apartment Buildings – the Money Making Machine for Real Estate Investors

Many new real estate investors often consider buying homes and land for investment; however, few consider the much more lucrative area of apartment building ownership. One of the main reasons for this is because newbies to the real estate investing business just simply do not know just how they would choose an apartment building for a solid investment. Where single family homes generally start at a reasonable cost, an apartment building is a much larger investment, and thus is often too daunting or scary for the new real estate investor to even think about.

The truth of the matter is that apartment buildings are money making machines, plain and simple. If you purchase the right building, it will make you money, and it will do it month after month, year after year. They are an area that you really should consider if you are looking to buy and hold properties for investment. And, if you are not too thrilled with the idea of becoming a “landlord” then you simply need to hire a management company and let them deal with all of the tenant issues of the building.

Apartment Building and Multi-Family Home Valuation

To determine the value of an apartment buildings or multi-family homes, you can use the following two equations:

Yearly Income from Rents –Yearly Maintenance/Upkeep Costs = Net Operating Expense

Net Operating Expense x10 = Approximate Value of the Property

While people will try to give you all kinds of numbers and figures on the property, the above is all you really need to make a good estimated valuation of the property itself.

Financing an Apartment Building or Multi-Family Home

Once you have found an apartment building or multi-family home that you would like to purchase for investment, you will then need to secure financing for it. If you have good credit, and you want to use a bank or traditional mortgage lender, they will generally lend to you on a property where you are seeing at least 75{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} of your net operating income each month in rents. In other words, if the cash is flowing through the property, the bank will want to lend to you.

If you choose to go with private money to fund your apartment building purchase, then you will find the process is much easier and cheaper for you as well.

If you decide to forage into the apartment building or multi-family home property investment arena, make sure to do all of your deals based on hard numbers. Those numbers tell the story of whether the building will be profitable for you or not. Just as the old adage says “numbers don’t lie.”