Tips for Buying an Apartment Complex

Buying an apartment complex (or any investment property) can be a very profitable venture or money-draining headache if the buyer is not careful. However, following a few simple steps before purchasing a property can save thousands of dollars and a lot of unneeded stress.

First, before looking for a property, the investor should do some much-needed research. Research about the area that the potential apartment complex is located. An investor should know how much similar properties in the area rent for and if the particular area has an over-saturation of vacant rentals. This will shed some light on whether the property will net a decent profit and if properties such as this will be in demand or stay on the rental market for a while.

When a suitable apartment complex is found after the proper research has been done on the neighborhood, the investor should always have a home inspection done by a qualified home inspector. Home inspections vary in price from $100-$500 usually, but they are well worth the cost and can save an investors thousands of dollars. Problems with plumbing, electrical components, termites, and the foundation are easily masked or hidden without a proper home inspection. This is not to say investors should shy away from apartment complexes or other rentals that do not have a completely clean home inspection. However, the cost of repairs and getting it up to code need to be considered into the cost of the investment and can oftentimes convince an unwavering seller to drop their price.

The seller should also be consulted with face-to-face when buying an apartment complex. Sometimes when the property is owned by a corporation, this is impossible, but it is ideal. An investor should always ask why the seller is trying to unload the property. Are they just retiring or need quick cash? Or is it because they have a hard time renting the units or turning a profit? Always request to see copies of the seller's receipts for rent in the last three years to see how long each of the units have been vacant. Remember vacant units do not collect rent or make the investor any money, so if the units have been vacant half of the time, chances are they will be for the new investor too.

Tenant amenities are another thing to consider when buying an apartment complex. While some features, like a swimming pool, are costly to maintain, they may make a property stand out amongst others and ensure that there are minimal turnover. Consider working into the budget money to install things like dishwashers, window seats, pedestal sinks in the bathroom, skylights, or something else unique and usually it will pay off in higher rent. Some apartment complexes may even have attractive features that are already present when an investor buys, but the more the better. Renters will always pay more if the unit is worth it.