This article originally appeared on https://steventaylorlandlord.com/4-factors-to-keep-in-mind-when-investing-in-apartment-complexes/
When considering investing in anything, according to Steven Taylor of Taylor Equities , the question you should always ask is: Why is this a good deal? A good deal isn’t just about numbers – a good deal has a compelling story and makes sense. Is the property mismanaged? Stressed? Under foreclosure? The facts should tell a story that explains why the property has value. Developing the instinct to recognize a good deal takes time, but with research, study, and experience you can learn to find the right investments.
Here are four factors to keep in mind when investing in apartment complexes.
1. Cash Flow
The probability of cash flow is a crucial factor to consider. It is important to evaluate how the property will generate cash flow in comparison to other potential properties. To start, ask yourself these questions:
- What is the strength of the rental market in the area?
- What type of market you are buying into (For example, C class buildings often have higher rates of tenant turnover. They can also call for more maintenance and repairs.)
- Financing (How much money are you putting down? What is the interest rate? What type of loan?)
The next thing to consider is if the apartment complex you are purchasing holds equity. If the property doesn’t have equity, can you create it? Equity in a property can take many forms. A few to look for are:
- Discounted listing price
- Upside potential (Fixer-upper)
- Poor management
- Opportunity for rezoning
While there are ways to create equity, you are better off buying into it. Be on the lookout for motivated sellers who... continue reading on Steven Taylor of Taylor Equities