It is rare to find a lot of people that will be able to buy huge apartment complexes at will. As your experience grows, you could potentially have that opportunity. We are talking million dollar properties here with dozens and dozens of units.
When buying huge investment properties like community apartment complexes, you need lots of cash. Usually it is experienced real esate professionals that get into this type of investing. You have to be very weary of the numbers when dealing with large complexes. Vacancy rates and other variables can be huge issues when dealing with these properties.
Sometimes the down payments required will be higher. You would be looking at putting anywhere from 20%40% down on the property. Privacy is minimal at these complexes and it tends to attract a different type of crowd. There is usually a lot of turnover in these properties as well, so you will have varying amounts of vacancies.
In recent years more investors are trying to get out of this type of investment. Some will give you great deals to take the properties off their hands. I have been offered a 26 unit property for over 40% lower than its appraised value. The investor’s problem, vacancy rates.
Another issue with larger properties like this is upkeep. The appearance of a large complex can go downhill in a hurry. Once that happens, less than stellar potential tenants try and move in. It is a snowball effect.
Keep on your toes about maintenance and make sure all of your other profit centers, such as laundry rooms and vending machines, are running optimally. It will be easier to keep the units rented if the property is taken care of.
Investing in Commercial properties
Commercial properties can be a big money maker for the real estate investor. Businesses have to be somewhere, why not in your commercial investment property. You have all types of commercial investment properties. You have strip centers, free standing buildings, office parks, mobile home parks, and many others.
Your commercial properties are only as good as your tenants. If you have good, profitable tenants, you will make more money. You won’t have to worry about keeping tenants in your property either. If they are profitable, they will stay. It can be tricky however, most businesses fail within a few short years, so it sometimes can be a hassle to find good, stable tenants.
You should get as much information from your potential tenants as you can to decide if they will be a good fit for your property.
Commercial investment property leases
Most commercial investments come with a longer term lease. The length of time will vary. It can be 5 years, or 2 years, or 10 years. Ideally, as an investor, you want long term tenants. The longer, the better for you, the more money you make. This is where you need a good attorney or group of attorneys to get all this done for you.
You can also have your attorney help you decide on what types of leases you will have. There are different ways you can go. One of the more common leases. A gross lease is where the tenant pays you rent and they pay the utilities. You pay everything else. Oftentimes this is how apartment complex leases are set up. As mentioned, there are other ways to set up your lease agreements. Get some ideas and see what you like, then go from there.
