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Should You Invest In An Apartment Block?

  • February 25, 2022

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Real estate investing generally falls into two categories: residential and commercial. On the residential front, we have condos, houses, terraced properties and townhouses. All of these are good investments. However, you may find that you’re more successful when you rent out an entire apartment block. 

Why Apartment Blocks Are A Good Investment

Apartment blocks are a good investment for several reasons. The first is that the property typically contains many tenants, the majority of which will be paying you at any given time. It’s not like a single rental property where the occupants pay you every month and you’re totally reliant on them. Instead, you’re able to spread the risk. 

Apartment blocks are also a good strategy for those who want to scale their property empire over time. Once you own an apartment building with paying tenants, you can use the cash flow they generate to support your applications for new mortgages to take out on other properties. 

Another benefit is the fact that you’re able to deduct practically all expenses from your taxable income. For instance, if you need to install a new lobby or repair someone’s dishwasher, you can with ease. 

Is It Profitable? 

Of course, the big question is whether investing in an apartment block is actually profitable. Generally speaking, apartments complexes are highly profitable and have proven so over the long term. 

If you are planning on investing, you should follow the one percent rule. That is, the property should bring in monthly rentals equal to 1 percent of the purchase price of the property. 

In today’s bloated and hyped up market, finding such properties can be a challenge, but it is possible, so long as you have the right approach. 

Make sure that all the major amenities of the building work correctly. Check the basement, stairwell, water and electricity systems. If there’s an elevator, consult with firms like Sheridan Lifts to see whether the building needs any more work. 

Do Your Due Diligence

Before buying any apartment block, check to make sure that there are no nasty surprises lurking under the surface. Check the building is actually in profit and make sure to get a property condition assessment done to find out if you’re being offered a good price. 

You’ll also want to carry out an environmental site assessment. This is essential for making sure that there are no traces of dangerous chemicals. Asbestos can be particularly harmful, so it is one to look out for. 

You’ll also want to get a market report done. This will tell you how much rental income you’re likely to get from the apartment block, both now and in the future.

Invest Via Syndication

Sometimes buying an apartment block outright is too expensive. You simply don’t have the capital to put down on a deposit. For this reason, you might want to invest via a syndication agreement. Here you invest by pooling your assets with other people, and then each taking a share proportional to the money you put in.