Many investors looking to get started in real estate look at investing in apartments. Apartment investing is a great way to begin investing in real estate. This is because apartments are something that we all have had some introduction to and are familiar with.
We all understand that “people will always need a roof over their heads”. And that is the nice thing about investing in apartment buildings. Getting started will take some time, and if you begin with the basics, you will be well ahead of most investors just starting out.
Benefits of Apartment Investing
1. Cash Flow
Bought properly, apartment buildings will provide a steady source of income for the owner. If you purchase a building in a good area with good management, your apartments will remain occupied, putting money in your pocket every month. The nice thing is that all of this can more-or-less happen on autopilot because you cah hire a property manager to handle the day-to-day activities.
This is an area where apartment buildings shine. Because the value of an apartment building is based on the income it provides to the owner, when you increase the net income, you increase the value of the property. Period. It is that simple – you simply purchase properties where you can increase rents and reduce expenses – realistically – while keeping everything properly managed and maintained. Try doing something – anything – to increase the value of your stock portfolio. You have no control whatsoever over your investment.
3. Equity Increase
Your equity also increases every single month. How? Because your tenants are paying off your mortgage. It may not be large equity jumps like when you manage the income and expenses. However, every single month your mortgage principal balance is reduced, thereby increasing your wealth. Month in and month out.
4. Tax Advantages
Apartments provide the owner tax benefits both through depreciation while owning the property and through a 1031 exchange. I don’t buy based on the tax benefits, but they are a nice bonus to get involved with apartment investing.
Steps to Get Started Investing In Apartment Buildings
Begin by educating yourself on apartment investing and property management. Even if you are going to hire someone else for the property management, you will want to have some knowledge base to go from. Start out by going through some apartment investment courses – they are difficult to find, but well worth looking for. In addition, if you can attend a live event with other investors, you will benefit from that, as well. Just by getting around others with like minds, you will be heading in the right direction.
Remember no matter how nice a building looks, or how new it is, or how great the neighborhood is, it all comes down to the numbers. Never, ever lose sight of that fact. Decide what your goals are for investing in apartments and choose the properties that will help you get there – fastest.
One of the biggest mistakes I see is a would-be investor who invests in his or her education, and never buys their first property. Take your time getting educated and going through the process, but I would encourage you to follow through and take action when the time is right. Then keep going. Get your first property and keep building your wealth over time.