6 Biggest Mistakes to Avoid When Buying Apartments
|Since success of an apartment investment is based on its current and future income stream, you must avoid the 6 biggest and most costly mistakes when buying a real estae apartment investment (and other types of investment property) that dramatically impacts the income of an investment.|
Losers in the real estate investment game regularly commit any combinations of these 6 mistakes with no favoritism given to the size of an investor. From a small investor like a husband and wife or an individual that buys a 4 unit building; to a large investor such as a REIT or an investment partnership that buys an 800-unit building, committing these 6 deadly mistakes can lead any size investor (experience or not), or apartment building investment to decline and failure.
By understanding these 6 most common reasons that causes an apartment building to suffer and have problems, you will be able to avoid these problems and make money on your investments.
6 Most Costly Mistakes Apartment Investors Make
How To Invest In Apartment Buildings
- Hiring Ineffective Management
- Don't Have a Viable Business Plan
- Excessive Leverage
- Not Making a Good Deal
- Lack of Local Market Knowledge
- Poor Market Timing
Buy rental properties in supplied strained markets where demand is outpacing the supply so that you have optimum market timing. Don't run with the herd of investors where emotion and over enthusiasm lead to high real estate prices. Become an independent thinker doing your own research making your own decisions.
Research the local market that you decide has good market timing opportunities. Hire the best local guides to give you advice and direction on the best locations to purchase rental property. If you decide to purchase outside your local area, then hook-up with a local partner that knows the area to help reduce possible risks and surprises.
Look at many properties for sale before deciding on a property to buy. The more properties you look at, the better understanding of the real estate values in the market you will have.
You need to put enough equity into the purchase so you don't put too much pressure on the property to cash flow. If you don't have the equity, find a partner that does. Usually 20% or more cash down payment will allow for the property to cover all the monthly bills including cash reserves and a very small net positive cash flow. Put together a financial model that includes your realistic breakeven point to give you a good indication of the amount of equity you'll safely need.
Create a business plan that realistically forecasts the goals and objectives of the investment property. Make sure this plan outlines what you are investing in and why. This detailed plan will help you stay focused and eliminate many surprises.
Finally, hire a top-notch local property management company. Make sure the property management company is one of the best at managing your type of property, and has proven results doing so. You could have a great property with a good business plan, but if you have a poor management company your investment will be doomed.
Here's an Apartment Investor's Mistakes to avoid summary:Make sure you find a good deal
Find a property where you can add value
Crunch all the numbers using a realistic financial model
Execute full due diligence on the property and local trade area
Purchase with enough equity in the deal so that your debt burden is not too risky
Create a viable business plan with investment goals
Maintain comfortable cash reserves
Hire a top notch local management team
|Craig Haskell is author of, The Inside Game to Real Estate Value Investing, and founder of an investing site, ValueHound, that brings together a community of opportunistic and value minded real estate investors who are serious about learning new approaches to capitalizing on today's "Once in a lifetime" buying opportunity. |
Craig, one of the nation's leading expert on the subject of real estate value investing, has helped hundreds of investors and organizations around the world to become more successful value real estate investors with his unique training and coaching programs that focus on making money capitalizing on today's undervalued real estate market.
Craig Haskell has devoted over 25 years to value real estate investing, and has owned and managed 7,200 units and 2.8 million square feet of commercial space and provided advisory services on over $2 billion in value. Craig's extensive personal real estate investing experience was the basis for the Value Hound Blueprint, a value investing system for real estate investors. Craig Haskell is also author of How to Take an Apartment Building from Money Pit to Money Maker, Secrets of Successful Apartment Buildings and A Guide to Creating Successful Apartment Advertisements.
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without the express written permission of the Author and/or REIClub.com.
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