When you’re wetting your feet in commercial real estate, just about any market may seem like the perfect way to expand your portfolio. So, it’s natural that the thought of buying an apartment to rent out has crossed your mind. Is it worth it?
According to a recent analysis of the housing market, it’s now better to rent than buy. What does this mean for would be investors? On the one hand, it’s good news because the demand for quality residential rental spaces will probably increase. On the other hand, it warns property owners that getting a return may take a while and is no guarantee.
The bottom line is that just about any type of investment has the potential to earn you high returns and owning an apartment is no different. The key to a successful investment is making sure that you purchase the right apartment. How do you do that?
Whether you start with a single unit, a duplex or a whole building, the following factors come into play:
Location
Is the place attractive to potential tenants? For example, if the property is in a college town, is it close enough to campus to make it a viable option for students? How wide of an appeal does the apartment achieve concerning location? Major roads, good schools and access to public transportation are other considerations.
Improvements
Many investors purchase “fixer-upper” properties hoping to earn back the money spent on improvements through great rent. Make sure that you get an accurate sense of your property’s value and how that may change following the improvements.
The Numbers
You should pull together some estimates of the property’s maintenance costs (including the mortgage!) and the going rent in the area for similar properties. These two key numbers can help you predict the viability of the investment. These estimates should show clear earnings with a bit of cushion, which makes your apartment investment worthwhile.
Ideally, it would help if you got into the apartment real estate business slowly. This will help make sure that you can learn the ropes of handling tenants, maintenance, and landlord responsibilities, slowly. There are quite a few legal requirements related to your new status as a landlord, so you’ll want to make sure that you’re up to speed on your responsibilities.
If you proceed with precaution and take the time to research the apartment you purchase well; chances are you’ll enjoy a high return on your investment. One way you can ensure your success is by hiring a skilled and experienced property manager. This will remove the majority of your responsibilities such as handling maintenance tasks, collecting rent and finding tenants, allowing you to focus on other things. When managed well, a carefully chosen apartment can offer excellent income that grows over time.
Ready to get started? Contact your trusted real estate agent to learn about the opportunities for investment. Before you know it, you could be signing on your first tenant in your new apartment.
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