Investing in real estate is a greatly exciting experience. It comes as no surprise that the smartest avenue to invest in is rental property. But what about an apartment for rent? An apartment for rent has its own pros and cons as does every other type of rental property. As a first time real estate investor, a good rental strategy is to start small. Develop your real estate investing strategy and grow your real estate business. Investing in an apartment for rent affords you this opportunity. As your cash flow increases from the rental property, you can expand your real estate investment portfolio.
Firstly, the biggest advantage when buying an apartment for rent is that you can invest in more housing units in the same building. When owning multiple housing units in the same building, it can expand your cash flow by decreasing your expenses. The property type that you own is very important to consider when it comes to expenses. Hypothetically speaking, the boiler broke in two of your rental properties. You own two rental homes that are scattered across the city. This will force you to buy two boilers, spending time and gas to travel between the two locations to repair the problem. However, when you have multiple housing units in the same apartment building, only one boiler is required to fix the issue in all the units.
Any successful real estate investor could tell you that the right apartment for rent generates more consistent rental income. A multi family home could bring rental income from more than one family. More families paying rent will create a larger cash flow for the real estate investor. It is also less likely to have a fully vacated building. Apartment for rent is a great idea for any investor. Before beginning to invest, the same factors need to be considered as buying any other rental property: Location, neighborhood, and surrounding area.
Related: Are furnished apartments for rent a good investment idea?
When investing in an apartment for rent, the real estate investor needs to look into how the location of interest is trending. It is a good sign if there is a high level of construction in the area. Realistically, you need an area that is thriving with grocery stores, hospitals, schools, parks, and other amenities for your tenants to enjoy. What you need to be cautious about is having developments in the location of interest that will be reducing the value of the rental property. Before signing any papers, get to know the area.
An apartment for rent is meant to make money and not spend it. But this is the real estate game and complications arise all the time. That is why it is recommended to make sure that you can afford the rental property. The wrong apartment for rent can be vacant for a month or two. For this reason it is important to have money on the side to act as a buffer for the negative cash flow moths. An apartment for rent that is empty will provide the real estate investor with negative cash flow. Negative cash flow is a no go as a real estate investing strategy. Thus, you should consider all your options before investing in an apartment for rent. Here are 6 must do strategies in order to recognize if the rental property is worth the trouble.
Monthly statements don’t add up
When looking into buying an apartment for rent, you must do your due diligence. Ask the previous real estate investor for the housing unit’s monthly statements. A thorough inspection of the statements will let you know if this is a positive cash flow property or a negative cash flow rental property.
Missing monthly statements
This one goes hand in hand with the previous. If the seller is offering you missing statements, it is the best strategy to not invest in the unit. Valuable information could be covered up if the statements are missing, meaning that there is a larger risk associated with this rental property.
Estimated numbers
A successful real estate investor will tell you never to go off the estimated numbers. Real estate has many rules made to give the buyer an idea of what to expect with every investments: The 1% rule, the 50% rule, and pro forma documents. These numbers are all estimates and are not relevant for every rental property. The property seller and/or the real estate broker create these pro-forma documents as rough estimates. These numbers are deceptive. Before investing, try using an investment property calculator. It is a great real estate investing tool that will help generate accurate numbers for the investment property of interest. An apartment for rent is a big investment. That’s why we at Mashvisor recommend the use of our investment property analysis calculator for accurate numbers.
Property maintenance
Pictures are deceiving. Inspect the apartment. Hire professionals. Do what you must to see if this is the investment property for you. As a real estate investor, you are committing to a long-term plan. This is an apartment for rent. Make sure that you are able to find a tenant to rent the unit. If you visit the apartment and find that the seller has been putting off repairs to this location, it may be for a reason. This is not necessarily a deal breaker. If the repairs are minor and you know it can be repaired with ease, use these flaws as a negotiating tool.
Real estate market trends
As previously mentioned, when buying an apartment for rent, location is crucial. The neighborhood needs to be trending in the right direction. The easiest way of finding an apartment for rent is having it in the right neighborhood. The demand on the rental property will be high, thus the rental income will also be high.
Real estate posting
A good rental property will get scooped up off the market in no time. So, when searching for a rental property, make sure that the listing has not been on the market for too long. This just means that this place has been passed up by many other real estate investors. They must have found something wrong, proceed with caution.
When asking is an apartment for rent a good real estate investing strategy?, the answer is yes! In the right location it will bring more cash flow. As long as you are willing to do your due diligence before investing, an apartment for rent can be a great source of passive income. For any real estate investing questions and tips visit Mashvisor!