Apartment investing gives investors the opportunity to build long term wealth, increase cash flow and create forced appreciation. Rental amounts are rising and vacancy rates are shrinking as homeowners shift back to the rental market. No one can deny that this is the best time to be a landlord.
It's easy to amplify your efforts. The same strategies that you use for single family residential properties can also be used for apartment houses.
You're looking for under performing properties with low cash flow and high vacancy rates. The ugly one that needs repairs is your ideal investment property.
Reposition the property
Rehab or defer the maintenance
Improve the management
Add a new tenant mixture and fill the vacancies
Evaluate. To evaluate if a rental property is a good deal use this software. It's the free software that will do all the hard work for you.
Flip. Apartment houses can be flipped, yes, just like single family houses but with a few special changes. Burned out landlords are the best source for finding apartment houses. They're motivated and many times provide owner financing. And in some cases, if they believe you'll turn the apartments around and create a positive cash flow they'll wait and take an equity split.
It's best to use a system with all the forms, contracts and steps mapped out so that nothing is forgotten. The system will do the hard part of the job and make your apartment flip a success. It also does double duty and has all the options if you decide to buy and hold.
Hold . Keep the apartments for long term positive cash flow, tax benefits and high cap rate. You can refinance with no taxes and no capital gains to get the equity out of the property and into your pocket. As Warren Buffett famously said, "Our favorite holding period is forever."
Pro Tip: Be sure to take advantage of tax deductions, depreciation, and interest paid on the mortgages of all your real estate investments.
Class A: Luxury rental housing. High end / High rise. The investor gets slow steady appreciation with low cash flow and low risk.
Class B: Apartments for working people who choose to rent instead of buy. These types of apartment houses cater to the young lower to mid level professional. The investor gets fast appreciation with stable cash flow. Plus low maintenance costs.
Class C: Apartments for working people who can not afford to buy a house. Perfect for blue collar and management level employees. The investor gets moderate appreciation and steady cash flow.
Class D: Properties for low income families that are usually government subsidized section 8 housing. These properties are more likely to create the largest cash flow but with the most managerial problems. Best solution- use a property management company to eliminate the headaches.
When a 10-unit apartment complex has 1 vacancy there is still a positive cash flow 90%. However a single family rental property has 1 vacancy it means 0% cash flow.
By diversifying your real estate portfolio with apartment investing, you'll gain powerful options that balance cash flow and appreciation while building long term wealth.