Why Apartment Investing

The Apartments Should Be Your Next Investment choice as there are so many investment opportunities with many advantages available in this type of investment. With the ever-increasing demand for housing at economical rates for the middle and lower-income families, the apartments are in every demand, and as such this forms the best way of investment with an assured high return on your investment.

Investing in an apartment building is the prudent step in the current financial situation and market trends and you can expect very strong returns with significant tax advantages and enjoy greater control and security on your investment.

The apartments are one of the most lucrative investment choices as these generate significant cash flows, with very good appreciation in value and an attractive investment opportunity for long-term benefit.

The Apartment buildings offer great economies of scale with many dwelling units giving more rental income at a reduced operating cost per unit leading to strong cash flow. An increasing rate of tax depreciation will significantly reduce your tax liability, and you can create more value in the property by raising rents, reducing expenses, keeping a good occupancy rate, and add more improvements to the building.

All these are bound to increase your cash flow maintaining a higher rate of return on your investment providing a strong reason to invest in apartment buildings.

you can maximize the value of your investment and create equity by raising rents, reducing expenses, increasing occupancy, and making strategic value-add improvements.

How to Underwrite Apartments

Underwriting apartments is the process of analyzing your loan application for the purpose of buying an apartment building for determining the quantum of risk involved in granting the loan. This is calculated based on your credit history, your earning capacity, your present financial stability, and the value of the asset you want to buy and the net annual income the property fetches for you.

The apartment underwriting process starts with the determination of the net operating income, based on the proforma submitted by you to your lender. This will contain all the details of the incomes and expenses that are currently available to arrive at the figure of the net operating income.

Based on this and other factors the lender will review the loan application to determine the amount of risk involved and take a final decision on your loan application to finance the purchase of the apartment building you want to buy.

The sole purpose of the apartment underwriting process is to mitigate the credit loss that may arise to the lender, and it goes through an elaborate process taking into many factors into consideration as the Underwriting process for a multi-family property is more complex than underwriting a single-family home.

How to Evaluate Apartment Properties

When you are in the process of buying an apartment complex and identified one that you feel it is right for you, the next step is to find out its real worth by finding out the price you can pay for it.

You can get a good deal by paying the lowest possible price for the apartment complex and for this you should know how to evaluate the property. One way is to use the Gross Rent Multiple in which all the annual rent receivable in the property and multiply it by 9 or 11 to get the low and highest range for the value of an apartment building.

Another method is to use the CAP rate in which the price of the property is divided by Net Operating income from the building to get the CAP rate for the building, and from this, we can find the profitability of the building by looking at the cap rate in %. This will give what percentage of the investment you will be able to realize a return on buying this property.

Like this, there are several ways to calculate the amount of money you can get back on purchasing the apartment complex. You should evaluate this carefully and take the Buy decision if the evaluation gives a fairly satisfactory return on your investment.

How to Find Apartment Deals

When you are planning to buy an Apartment you must not have any hassles. This must be a transparent process and you should be able to find the required type of Apartment easily and the info you receive in this regard should be accurate and reliable. The pricing data for the apartment must be very open and must be clear without any ambiguous terms.

In such a case you will be able to find the best deals while buying the apartment you want. Rely only on very reputable sources for getting the information regarding the apartments available for sale. For this, there are numerous online sources that will help you get the full and updated list of apartments available for sale in your local area.

Enquire with friends and relatives to search and find the right real estate professionals, so that you are able to find the best deals. They will have all the information you need to take the right decision and will help you buy the apartment at the right price. They will also help you to get the best deals so that your investment on a multifamily property is safe and growing to give you the best returns on a regular basis.

How to Buy an Apartment with No Money Down

When you are planning to buy a multi-family property you need to pay a down payment. There are many ways to raise the money towards payment of down payment so that you can buy an apartment with no money down.

Some of them include:

1. Getting money from Private Moneylenders: When there is a chance of good returns private money lenders will be happy to give you the amount towards a down payment for buying an Apartment complex
2. Money on Equity Share in the property: Private Money lenders will give you the down payment amount if you give them a share in the property and promise to pay a share in the rental collection and a share in the sale proceeds when you sell property
3. Borrowing from Hard money lenders who lend you money based on the real value of the Apartment you are buying and not based on your credit score.
4. Getting money as Repair allowance when you undertake the repairs to the property by your means and the amount that must be spent by the seller towards impending repairs will be adjusted towards the down payment
5. Crowd funding for collecting small amounts from large several investors through a network of investors. In this, you will be requesting funds based on your multifamily purchase and management project and if it is convincing then a large number of investors will invest small amounts and this amount can be used for making down payment.

What Are Apartment Affordable Units?

The Apartment Affordable units are the ones that are earmarked for low-income families that qualify to get a part of their rent paid through Government subsidies. The families that have less Area Median Income (AMI) are entitled to get a part of their rent payable through Government grants available for these people.

The Department of Housing and Urban Development determines the Area Median Income for each locality and the families that have a yearly income lower than this Area Median Income qualify for occupying affordable units in Apartment complexes.

These affordable housing units are available for occupation by families with limited financial resources. These are the Apartment units that are usually acquired, built, or renovated using public funds or under special Government schemes. There is a certain number of these affordable Apartment units set aside for this class of people who are entitled to occupy the affordable apartment units as a community benefit.

Most of the States in the US have County Housing Grants or the federally funded Housing Choice Voucher Program formerly called as the Section 8 Grants available to the Apartment owners and they provide rental assistance for families that have below AMI value and thus get the apartments as Affordable Apartment units.

What Is The Apartment Cap Rate?

The Cap rate or the Capitalization rate for an Apartment is defined as the ratio of the Net Operating Income ( NOI ) to the total asset value of the Apartment. This is one of the most fundamental metrics that is applied to any sale of property in the commercial real estate industry and is expressed in percentage values.

The Cap rate for an apartment can be found using the following formula of

Cap Rate = ( Net Operating Income ) divided by ( the value of the Apartment)

The significance of the Cap rate is that it represents the percentage return an investor in an Apartment would get on an all-cash purchase. It is also taken as a representation of the Price / Earnings multiple is usually the valuation multiple of the apartment goes down when the cap rate for the same goes up.

When you are selling your Apartment the cap rate for it must be low as it signifies a higher value for your property and if you are buying an apartment it must be high as it indicates that you are buying an apartment that has higher asset value. Thus take note of the Apartment Cap rate when you are buying or selling your Apartment.

What Is an Apartment Syndication

Apartment syndication is a formal arrangement in which many investors (be it individuals or businesses) come together in investing in an Apartment complex. By this arrangement it is possible for each one of those participating in the syndication to invest and own much larger properties than they can invest by themselves.

Unlike in the past when big real-estate syndications were possible for only the wealthiest and well-connected individuals now anybody can participate in the present Apartment syndications and enjoy the fruits of a common investment and secured regular and repetitive income. This is made possible with the emergence of the crowd funding concept in real estate since the passing of the JOBS Act in 2012.

In Apartment syndication, the parties concerned are the sponsor of the project and the group of investors who participate in the syndication process. Usually, the sponsor invests less and takes control of the Apartment complex and manages the whole property on behalf of other investors who have contributed to the syndication.

Rental Income and property value appreciation are the main incomes that are derived out of Apartment syndication, and the income is distributed either on a monthly or a quarterly basis depending on the share of amount invested by them in the project.

Why Invest In Apartment Properties

Investing in the apartment of multi-family homes is a good decision, once you commit yourself after familiarizing yourself with each aspect of dealing with apartment houses as a way of investment. In the present day with so many apartment buildings available for sale, it is possible even to have your career of being an apartment owner.

There are many reasons to become an investor in apartment buildings and the most important among them are

1. Recurring rental income: As the owner of an apartment house you can rent it and get recurring rental income that will come to you month after month without you having to do anything.
2. With the standard recurring income, you can plan your life in a better way and create more streams of income to reach a better future
3. When you are owning a multi-family property even if some of them lie vacant it is not going to affect you like a vacant single-family home
4. You get many tax benefits when you are owning and managing multi-family properties
5. Unlike single-family homes, the multifamily apartments tend to have higher potential value and hence it is easy to raise money on them from both individuals as well as from institutions.
6. You can easily upgrade your apartment property by adding more facilities and amenities and raise the rent to get increased income out of the property.
7. As the Single-family homes ask for a higher rental amount than multi-family apartments it is easy to rent them and chances of it lying vacant are very slim.

 

Thus, it is always prudent to invest in multi-family apartment properties.