If you are just beginning in real estate investing, apartment rentals are a great option for you to start with. If you are wondering what makes them a great option, and what you need to do in order for you to make the best of them, then continue reading.
For you, as a beginner investor, it is important to understand the apartment rentals real estate investment strategy. Why is it a good idea for you as a beginner? What to look for when investing in apartment rentals? Where do beginner real estate investors go wrong? And what is the action plan to start with apartment rentals investments? We are going to answer these real estate investing questions for you here.
Related: Why You Should Invest in Apartment Rentals Before House Rentals
Why is it a good idea to invest in apartment rentals if you are just starting in real estate investing?
First: There has always been a demand for apartments in the real estate market. Moreover, the demand is expected to keep inclining in the future as well.
Second: Availability is another factor that plays an important role in apartment rentals investments. If you just take a look at the area you live in, you will find that there are more apartment buildings in it than office buildings, for example. This, of course, indicates a great opportunity for you as a beginner in real estate investing.
Third: It is not so complicated to understand the apartment rentals business. You will not have to deal with complex procedures or even lease agreements. If you compare apartment rentals to office rentals, then the latter is much more complicated. In addition to dealing with complicated procedures, you will also have to work with a real estate attorney. This is something that you have to take into consideration when choosing the best investment strategy in real estate investing.
Fourth: You can easily finance them with a loan. The rental income is steady, and that is the very reason why banks and private lenders will not have a problem lending you the money you need for your investment. To be sure, you can use an Airbnb calculator to forecast the rental income from your apartment.
What should you look for when investing in apartment rentals?
Location: It is one of the most important factors that your investment property gets affected by. When purchasing an apartment or even more so, an apartment building, you have to make sure that you are investing in the right location. Check for facilities, amenities, crime rate, average cap rate, cash on cash return, and so on. You must pay attention to the job market as well. The better the job market is in that location, the more your real estate investing business is going to prosper.
Property management: You must set your property management strategy even before purchasing the investment property. Are you planning on managing it yourself? Or are you going to hire a professional property management company to do the work for you? Of course, if you are a beginner real estate investor, it might be a better idea for you to hire a professional property management company that will do the job for you.
The condition of the property: Take a good look at every detail of the investment property. Check everything inside and outside. It is OK if your apartment property needs some repairs. However, make sure it does not need major improvements. Otherwise, it is going to cost you even more than it should. As a beginner real estate investor, the last thing you want to deal with is major improvements on your first investment property. But, you can still go with it when you become more experienced in the real estate investing field. It is just too risky for you at the beginning.
Where do beginner real estate investors go wrong when investing in apartment rentals?
They believe what is in the brochures!: Believing what you see on a real estate broker’s brochure is wrong. Once you see the brochure, you must contact the property seller and ask directly for details. Ask about the financial statements for the past few months as well. All the information on the brochures is designed to get you interested, and that is exactly what you should keep in mind.
Miscalculating expenses: That is where beginner real estate investors fall short. Calculating the investment property’s expenses is a detrimental factor for your real estate investing business’s success. You must learn to do your calculations properly. Learn to calculate the revenue (rental income), how much you pay for maintenance (expenses), and what you have left as a cash flow (profit). Do not think that apartments are easier to deal with and that there aren’t any expenses associated with them. If you fail to do your calculations right, you might end up paying these expenses with your own money. Another tip that you must know is to keep a record of every single dime either earned or spent from or on the investment property.
Related: How to Calculate Return on Investment in Real Estate: 5 Different Ways
What is the action plan to get started with apartment rentals investing?
Set your objectives: Sure enough, you must know what you are doing and why you are doing it. Why is it apartment rentals that you want to invest in? Is it the right strategy for you? Are you confident enough to begin with this particular real estate investment strategy? Once you have answered these questions for yourself, everything will seem easier for you, especially setting a plan that you are going to work according to.
Education: Get educated on investing in apartment rentals. Especially, learn to deal with numbers. In other words, learn how to calculate the investment property’s rental income versus its expenses and what you get in cash flow at the end.
Related: Cash Flow Investment Property: The Key to a Successful Investment
Find the right real estate broker: You must find the right real estate broker who has a good experience with apartment buildings.
Visit apartment buildings: Checking brochures is not enough. As we said before, brochures are designed to get you interested. Go ahead and visit properties yourself, and make sure they are exactly how they are described by the property sellers and their real estate broker.
Exit strategy: In fact, you should have multiple exit strategies that will serve you in case of foreclosure or any unexpected circumstances. For example, if anything goes wrong, you might flip your investment property. Just make sure that your strategies are easy to put to work and are reasonable.
Finally!
Now that you know what it takes to make the best of apartment rentals investments, you should proceed. You can also check Mashvisor for more information on the real estate investing business. As a beginner, you will find all the market data and analysis needed for you to set your business plan.