An apartment building is an investment opportunity that could pay off for years to come. However, if you do not do your homework, the opportunity could turn into a money pit instead. If you are thinking of buying an apartment building, here are some questions you need to ask before making an offer.
What Is the Potential for Profit Right Now?
Even though you need to consider the potential for profit in the future, you also need to be concerned with whether or not the property can generate income now. Unless you have another source of income that will allow you to take on such projects as renovating the apartments, you could have trouble carrying the financial weight of the building and supporting yourself.
Take the time to study the condition of the apartments, how many occupants currently live there, and the market. When evaluating the occupants, you need to know whether or not there will be a massive move-out of tenants in the next few months. If so, you should consider what it will take to make the apartments ready to rent to a new tenant.
How Long Have the Apartments Been on the Market?
The length of time that an apartment building has been on the market is not necessarily an indication of whether or not it is worth buying, but you should definitely investigate the situation if it has been available for a long period of time. An apartment building that seems to be in good condition and has a reasonable price should sell within a short period of time. If it is not, there might be an issue.
Talk to your real estate agent and he or she can research why the building still has not sold. You should also talk to the owner of the building. In addition to speaking to these parties, talk to the tenants. If there is an issue with the apartments, you should be able to uncover it.
Will You Self-Manage the Apartments?
Self-managing your apartment building can take considerable time and effort. If you are new to managing a property, you will quickly find that getting the job done can interfere with your personal and professional life. If you are considering taking on the job though, you need to consider whether or not you have the time it will take to ensure your residents are happy.
If you are planning to hire a manager or contract with a property management service, you need to consider the additional expenses that come with both options.
Talk to your real estate agent about any investment concerns you have and to learn more about your options.