Buying an Apartment Complex: Find the Right Investment for You

For the first time in years, it's a buyer's market. While not as hard hit as the residential and commercial real estate markets, apartment complexes are not immune to the current economic slump. If you've been toying with the idea of multifamily real estate investment, now is a great time to get your foot in the door. Like any major financial commitment, buying an apartment complex requires careful investigation of the potential investment and adequate planning to maintain its value.

Evaluating Your Investment

Location, location, location!
Just like purchasing your own home, location is a vital factor in evaluating the value of an apartment complex. If people spend a good percentage of their monthly income on rent, they will want the best they can afford. Proximity to major employment hubs, quality of the local schools and general appeal of the area are all features potential residents take into account before they even walk in the door.

Can you foresee potential tenant issues?
Late rent payments and eviction notices may not be disclosed upon casual inquiry, but you can often get an idea of any potential tenant issues by simply walking around the property. Quality tenants care about where they live and how it's maintained. Trash in the carports, balconies used as storage spaces and music blaring throughout the complex can be indicative of the residents. Income isn't a barometer for tenant quality, but consider the financial qualifications for renting. If you intend to significantly raise rents within the next year or two, you may be faced with a large number of vacancies to fill if the complex currently requires a gross monthly income less than 2.5 times the monthly rent.

Assess the condition of the property.
In walking around the property, observe the buildings themselves. A property built before the 1990s will likely need some renovation to upgrade its appeal, but if you are considering an apartment complex with a price tag that seems like it's too good to be true then take an objective step back. There may be issues that could drain more out of your pocket than you get out of the property.