Investors love to buy apartment buildings. They’re an excellent purchase for many reasons. Total Realty Group will share with you why investing in apartments is the best place to put your money. Of all the real estate purchases to make, apartments are arguably the greatest return on your dollar.
INCOME. One of the most important reasons why apartments are the best. Income should have an investor chomping at the bit. We’re talking about major cash flow here. Let’s use an example of a 100 unit building. This is a lot of cash flow each month and even more each year!
The vacancy issue with a large amount of units is not a big problem when compared to dealing with a triplex or fourplex. You can have 10 units vacant in a 100 unit building and only lose 10% of your income for a short period of time and you will rarely see a vacancy issue of that proportion if your building is in a high demand rental market.
Of course you will need to calculate your Net Operating Income (NOI). This is your cash flow after all expenses. You can increase your NOI by raising your rent. Your rent increase does not need to be much if you have 100 units. How much should you increase? Let’s say a simple $20 per month on each unit. $20 per month for 100 units multiplied by 12 months is $24,000 a year! Not bad, right?
The value of an apartment is based on its income. There’s no need to guess when looking at the value of an apartment complex. All you need to now is the NOI divided by the Capitalization Rate (CAP) and you can come up with a quick value of the property. This is why investors love apartments.
We’ll get into other reasons down the road. Contact us if you would like more information on today’s current market CAP Rate. You can also take a look at our 1031 Exchange and Lowering Expenses blogs for more information on multi-unit investing.