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The Top 15 Reason to Own an Apartment Building as an Investment Right Now

by Ted Karsch on October 14, 2008 · 3 comments

  

  1. You control the cash flow. Unlike other, passive, investments such as stocks and bonds, the owner of an apartment building is the CEO. If you need more cash flow and the local market will allow it, the owner can raise rents.
  2. If you don’t want to manage the day to day operations of the apartment complex then you can delegate the management duties to a qualified and licensed real estate management company.
  3. It is possible to get seller financing. Many apartment building owners are savvy investors and are more than willing to offer seller financing. This makes the purchase of an apartment building easier without having to qualify for a bank loan.
  4. All of the units are under one roof. This fact makes management easier and more cost effective.
  5. Forced Appreciation. Apartment buildings are valued according to the net operating income. This means that a motivated apartment building owner can directly increase the market value of his or her investment by cutting or reducing various maintenance costs. Value can also be increased by making strategic improvements to the property.
  6. The stock market stinks. The stock market has been a roller coaster ride for most investors. Why trust your hard earned money to chance? Apartment buildings offer a relatively low risk investment with a high rate of return.
  7. Your job stinks. If you are employed full time working for someone else you can never be sure how long you will have your job. The income from a well managed apartment building is relatively stable and secure. Most tenants will be on a year long lease.
  8. Appreciation. During times of high inflation, such as now, apartment buildings tend to see their value increase. Historically, rents tend to rise along with the prices of other goods and services.
  9. Lower cost per unit. Typically, apartment buildings have a lower cost per each unit than residential homes or triplexes and duplexes.
  10. You control the quality and quantity of your income. As an apartment building owner you can control the quality of your income. This means that you determine who rents from your building and who doesn’t. The quality of income from a person employed as a school teacher for 15 years is different than the quality of income derived from a shiftless day laborer.
  11. Maintenance on apartment building units can be a lot more affordable than maintenance on an equal number single family home units. Generally, contractors will be more competitive on their bids for large jobs, under one roof, then they would be for an equal number of small jobs spread across town.
  12. Retirement money. An apartment building can be a steady source of income during your retirement years. An apartment building investment will allow you to work only part time while still receiving a full time income. If you need an affordable place to live you can live in one your units.
  13. Pay half the taxes you now pay. Standard tax rates of 30-50% don’t apply. You will be able to pay the capital gains rate of 15% by buying and holding.
  14. Pass on the wealth to your children or grand children. Have you thought about how you will pay for your children’s or grandchildren’s college education? Apartment buildings can be easily passed on to your heirs. If they lack the experience or desire to manage the building you can have management already in place for them.
  15. Foreclosures. Millions of families are now facing foreclosure. These displaced people will need a place to live. They will most likely be renting because mortgages are harder to come by while home prices are still dropping in most areas of the country.

Photo Credit: albany_tim

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{ 3 comments… read them below or add one }

Mortgages October 15, 2008 at 1:57 am

What you do have to consider is the ability to sll the proerty when you need to. The laws in the USA will aloow you to sell your share at any time, either making a loss of profit, you also have the money in your account a lot quicker.
You do not have the associated costs of solicitors, or connnecting elctric, furniture to make your apartment look good.
In amarket where property prices are rising, it could be a great investment. When they are dropping, you can only ue this as a long term investment.

Reply

Ned Carey October 16, 2008 at 7:43 pm

I think #2 is key. Many people think of themselves as real estate investors but really they have a part time job.

As far as #3 goes I have been finding that may lenders don’t want any secondary financing in place.

Reply

Andre Miller December 17, 2012 at 2:29 pm

hi, my name is Andre Miller and im 23 and i would like to know what would i have to do to own my own building complex

Reply

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