If you’re reading this blog, real estate investment is definitely either a passion or a serious interest for you. Either way, we can assure you it’s a great way to invest and make money through rental income, appreciation, and the profits generated by activities that depend on the property. So, to further diversify your real estate portfolio, why not consider investing in the apartment market? In this post, we’ll show you why and how.
Is it Smart to Invest in the Apartment Market Now?
Real estate investors look for an investment strategy to give them a slow but steady appreciation in portfolio value, as well as an additional monthly income source. Perhaps also, a passive income stream, although no investment can be ignored all the time! Apartment complexes or multifamily properties are a smart investment because of:
- Demand. Despite what’s going on in the world, people will always need somewhere to live. You’re therefore almost guaranteed to make money through rental income.
- Investment trends. Reports show that the multifamily sector is predicted to rebound and fully recover from the economic drag of the pandemic in 2022.
- Tax benefits. The advantages that apartment housing offers when it comes to taxes are worth your consideration. These benefits include no-limit mortgage interest deductions, and depreciation accelerations that shield a portion of the cash flow generated and paid out to investors.
- Property appreciation. Apartment properties provide excellent appreciation in value that meets and exceeds other real estate investment types. The property value increases due to reasons such as rent increase, asset management and maintenance, and more.
- Ease of building a real estate portfolio. Multifamily real estate is a perfect choice for investors who wish to build a large portfolio of rental properties. It’s easier for an investor to acquire and manage a 10-unit apartment complex than to acquire and manage 10 different single-family homes or other diverse properties, for instance.
How to Invest in the Apartment Market
There are many routes to starting your apartment investment journey. A good first step for investors who want to be property owners is to do your due diligence and determine the best option for you. Of course, that will depend on
- the amount of risk you’re willing to take on,
- how much money you have available to invest initially, and
- your level of real estate investing expertise.
However there are many other ways to invest than the ones we have space to mention here. For that reason, it’s important to consult with real estate experts to help you get started in this market.
Buy Into the Apartment Market Yourself
This is the easiest and most straightforward way to invest in apartments. Of course, you need to have the most upfront capital for this option. In addition, it can be the most intimidating way to invest, especially when you’re just starting out in this market. So make sure you consider everything and triple check to make sure everything goes right.
Buy With a Partner
When you don’t have enough capital upfront, teaming up with a partner is a great option for acquiring an apartment complex. This solution allows you to split both profits and risk with another individual. Even though you’ll not be making the same profits as with an individual investment, it’s still a significant choice. Working with a partner may allow you to purchase in locations that were otherwise not in your income bracket. The better the location, the better the overall ROI.
Invest Through a Syndication
A syndication is a pool of funds from various investors in order to purchase a property. For the most expensive properties such as apartment complexes, real estate investors can come together and pool money and resources to invest in larger projects than they could afford or manage individually.
Everybody involved can start making money as soon as they start collecting rental income, and property appreciation generally starts straight away with these high-end purchases.
Every syndication period is different depending on the property and goals of the individuals involved. This is where consultation can help you avoid a costly error.
Invest Through a Real Estate Fund
Investors looking to invest in multiple-income producing properties can benefit by doing so with a real estate fund that mainly focuses on investing in securities offered by the apartment market. With a real estate fund, you’re able to invest in multiple properties. However, the possible drawback with investing in this way is that you’ll be investing without knowing what properties you are actually investing in.
5 Things to Consider Before Investing in the Apartment Market
Some are more obvious, but together they will affect your ROI, so we offer them as a check.
The area or community around your apartment complex is of prime importance. It dictates what kind of renters you will have, security of your property beyond what you yourself install, and the quality of services you can offer and charge for. Therefore, make sure to study the neighborhood because making money out of your investment property is our chief aim!
2 Market Conditions
Market conditions are a highly determinant factor to consider before investing in any type of real estate. In the periods when the market is down, buyers usually have the upper hand in driving prices down. When the market is up, the opposite will apply.
It follows, therefore, that current market conditions will act as your guide to make better financial decisions. This applies whether you’re a micro or macro investor.
Other things to consider include local economic conditions that have the power to affect the apartment market such as access to schools, hospitals, etc.
3 Value-Add Opportunities
Look for properties that have an opportunity for some renovation and improvement. These can help you raise your rental rate. Remember to choose wisely, because some remodeling projects could end up costing more than you hoped to get back.
Apartment buildings will often have some of the following value-add opportunities such as a tech upgrade, washer/dryer installation, parking space, etc.
4 Appreciation Potential
When evaluating an investment property, it’s essential you’re able to get your returns through cash flow or appreciation. Check carefully what potential your apartment has for appreciation.
5 Condition of Property
Check the condition of the apartment building and its systems such as electrical, plumbing, roofing, etc. Depending on the condition of these systems and other features of the property, you may be able to cost in the fact you’ll either conserve money for a while or have to spend more up front to make improvements before renting starts.
We Can Help You
At Realty Capital Partners (RCP), we would welcome the opportunity to share more about RE investment opportunities that could diversify your portfolio into the apartment market.
Call us on (469) 529-6024 or email us today at email@example.com.