Apartment Building Investment “What Ifs”

by | BiggerPockets.com

The decision to buy an apartment building investment for the first time can be a fearful experience for many real estate investors. The task of owning and managing an apartment building can seem overwhelming and the feeling of fear usually is due to the unknown factor of the “what ifs”. The “what ifs” are all the things that could possibly go wrong with ownership of an apartment building. Usually the “what ifs” seem a lot worse in your mind then they actually are in the real world. Remember, an apartment building investment is insured against most of the “what ifs” and proper preventative maintenance and management can prevent most problems before they arise.

Apartment Building Investment “What Ifs”:

  1. What if my tenants don’t pay the rent and refuse to leave?

    What if they stay in my apartment like Michael Keaton did in the movie Pacific heights?

    Thankfully, all states have a legal process for the eviction of tenants. In some states tenants have more rights and the landlord more obligations then others. As part of your management team it is recommended to have qualified legal consul who specializes in real estate law. Just follow the process. Also, remember to be especially diligent.

  2. What if a tenant slips and falls and sues me?

    If you own many apartment building rental units then chances are that you will be sued on occasion. Once again, this is the cost of doing business. Don’t believe any real estate guru that tells you that you can get rich overnight without doing any work. Remember to keep detailed records of all maintenance that you perform on the property. These records could be useful in defending lawsuits.

  3. What if I can’t rent out the units and therefore can’t pay the mortgage?

    Make sure you research the rent rolls of the property you are purchasing very carefully. Look to make sure that tenant turn over is not too high. Are the rents you are asking in line with the rest of the area for comparable buildings? Are you doing enough advertising to ensure that you have a steady number of applicants to fill empty units?

  4. What if there is a fire?

    Insurance will cover accidental fire damage to the building.Again, make sure that you are keeping up with preventative maintenance.

Remember, just a small amount of diligent preventative maintenance along with a good insurance policy will protect against most of the apartment building investment “what ifs”.

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  1. I think the key point, which you definitely stressed is diligence and prevention. If you’re going to become a landlord, always being a step ahead of a problem is the name of the game. Keep that in mind and things should work out for you!

  2. Dike Drummond on

    Insurance can protect you against everything including “Acts of God” and is just a cost of doing business – plunk it into your proforma.
    Most state laws will help a landlord evict a deadbeat tenant – heck, in TX you can have them out on the sidewalk in 30 days.
    The most important determinant of your rent, vacancy rate and turnover is the “sense of community” you create in your apartment complex.

  3. If you let the what ifs get to you then you would never wake up in the morning. What if I slip in my own shower? What if I get in a wreck driving to an appointment?

    If Wal-Mart worried about being stolen from extensively then they would be about of business. There is always someone in the world stealing from Wal-Mart.

  4. Managing an apartment building for the first time was scary for me too. I had lots of tenants and had to make sure they were all happy. At Signature Community properties, we developed a 100% Satisfaction Guarantee incentive program. If people are not satisfied with their home or our services, they can terminate their lease at anytime within the first 30 days without penalty. Offering this incentive will increase, if not maintain, the number of tenants in your building.

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