HOW CAN YOU BUY AN APARTMENT TO RENT OUT FOR PROFIT
By Joe Arias
Investing in apartments is one of the easiest and best ways to make money as a real estate investor. Apartments will always be in demand, especially as younger demographics continue to wait until later in life to buy homes. Aside from the regular maintenance, renting apartments for profit is a generally hands-off process, making it great for beginners just getting into real estate investing. In this article, we will share how you can buy an apartment to rent out for profit.
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Why You Should Buy an Apartment as an Investment
Before explaining how you can buy an apartment as a real estate investment, it’s important to address why you want to. When done correctly and knowledgeably, apartments can be a very profitable real estate investment strategy. With apartment investing, you have a guaranteed amount of money that you know will come in every single month. Many other real estate investing strategies do not have this reliable income stream. Apartments are also generally easy to maintain. As long as you are not investing in a large complex – which is not recommended for beginners – you will not need to rely on paying any management companies. Since demand is high for apartments, they are seen as low-risk investments, which is perfect for any beginner. It will be very easy for you to keep vacancy low and profit quickly.
How to Buy an Apartment for Real Estate Investing
There are many steps to buying an apartment for real estate investing. You will have to pick where it will be, find a good fit, conduct an analysis, look into options for financing, get it appraised, and then get tenants to start making an income from it. Below are the steps broken down into specifics to help you get started in apartment real estate investing.
Decide on a Location
The first step of buying an apartment is to decide where you will buy. There are important factors to consider: median home value, median age, unemployment rate, population growth, median salary, and job growth. All of these factors give you a little more insight into the area and the direction in which it is going. Areas with high job growth and low unemployment rates mean there are plenty of jobs. This, in turn, will lead to population growth and will result in more demand for apartments and eventually allow you to charge higher rates. Choose somewhere that is growing but not outright unaffordable for buying your first property.
Find Apartments for Sale
Once you have decided on a location, it is time to start looking for apartments for sale. At this point, you need to start considering what you are looking for in an apartment building. Consider things like the number of units, whether or not you will need to renovate, and home value. An apartment building may be a perfect fit with unit types, but it may not be the best option for your first investment property if it is pricey and will require work.
Perform a Property Analysis
Once you have narrowed down your search and found a few properties that you think could be a good fit, it’s time to perform a property analysis to understand further which property is the best option. Use the investment property calculator to get an idea of each property’s cap rate, positive cash flow, and cash on cash return. These numbers will let you know the property is a good investment or not.
Look Into Financing Options
Now that you have a better understanding of the costs of the apartments you are looking at and the return you expect to get, it’s time to look into your financing options. Most real estate investors do not have the capital on their first deal to buy it outright. Using financing will allow you to buy the property and use the income to pay it off quickly. You can either choose to finance through a traditional mortgage, a home equity loan, or private financing. Most beginners prefer to do a traditional mortgage for their first property, but you must do your research and find the financing option that works best for you. If you already have a home, you may be better off with the home equity loan.
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Get the Apartment Inspected and Appraised
Once you decide on the apartment you feel is the best investment, you need to have it professionally inspected and appraised. The inspection is essential to ensure you are not buying a property with any damage you were not aware of. Structural damage especially could be very costly. Your mortgage provider will require an appraisal to ensure the purchase price is similar to the appraised value.
Renting the Apartment
Once you have purchased the apartment, it’s time to rent it out and make some income. For the best results, you will want to invest in making any necessary home improvements and ensuring the apartments have a modern look with updated appliances and amenities. Make sure to screen all potential renters to lessen your chances of dealing with eviction or undesirable tenants. Hire an attorney when you first start off to deal with all of the legal aspects of renting out an apartment.
Summary
Learning how to buy an apartment is essential to a successful real estate investment strategy. It’s an excellent way for beginners to start making a reliable income from their investment properties. Apartments are generally very little work once they are purchased and are an easy way to make passive income.
For more tips on real estate investing, make sure to check out the rest of our articles.
Joe Arias and his partners have flipped hundreds of properties in the Southern California Region. He has developed cutting-edge systems to simplify and scale the entire remodel process that can easily be applied to flipping, rentals, wholesaling, and other passive income strategies. More recently, Joe founded a real estate investing education company called RealSuccess Investments, allowing him to share his tools and systems with hundreds of up-and-coming investors.
RealSuccess is focused on education on flipping, rentals, passive income, and wholesaling.
Joe is also a best-selling author. He has written 4 books: Finding your RealSuccess, First Steps to Flipping, R stands for Rentals and Retirement, and Wholesaling Real Estate.
“I came from Argentina when I was 20, I am 40 years old now. I didn’t know anyone, I am CERO generation, usually people say, I am first or second generation but I was the one that crossed the border, no language, no friends, no family, no money, nothing, nada… If I can do it, anyone can.”
From a young latino immigrant to a celebrated real estate investor, Joe is a true testament to hard work and discipline. As an investor, he has made it his mission to help others achieve financial freedom while enjoying living a life of passion, fulfillment, and empowerment.
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