Investing in an apartment complex is an excellent opportunity to generate passive income. These facilities help you build wealth and be a hands-on landlord. However, if you prefer to leave the facility management to another, you can do that, too. Here are the primary reasons you should invest in an apartment complex.
Easy To Compare
One of the first things lenders examine applying for CMBS conduit loans is building comparables. Unlike single-family homes, where comparables are based on sales, apartment building comps are determined by potential income. The lender looks at the number of units filled and the monthly lease rate. They know immediately the revenue that the building will generate as soon as you own the property. This number is then compared to other facilities in the area.
You also know your return on investment during the initial sales process. The current owner provides you statistics regarding current lease income. Those contracts will transition under your management when the transaction is finalized. Those rent payments will go directly into your bank account.
Apartment complexes provide opportunities to generate additional revenue. These opportunities vary, but you can increase lease rates by adding additional services or amenities, such as:
- Fitness center
- Security service
- On-site property management
- Bike storage
- In-unit laundry
Partner With Others
Apartment buildings can be expensive, and a sole proprietor may struggle to get approval for some CMBS conduit loans. A financially savvy business partner often provides additional financial backing to help you get the needed loan approval. Because of the financial gain, many investors are willing to develop partnerships.
If you are not ready to be a full-time landlord, you can contract with a property management firm. Effective property managers handle everything from new tenant marketing to building maintenance to lease collection. They charge a fee for their services, but a good property manager improves your building’s profitability.
Commercial real estate accountants help you develop an efficient tax strategy. Depreciation allows you to spread the cost of the building and other assets across their useful life. In addition, you can deduct all operating and maintenance expenses paid throughout the year. No matter how small, these deductions add up to substantial tax savings.
While finding the right investment opportunity can be challenging, the rewards are worth the effort. With your ownership rights to your building, you can start collecting the benefits.