Investing in Apartment Buildings is a great way to make a large profit from just one deal. It can take time to complete and realize your earnings but it is well worth the time once you sell it to another investor who only looks at the income from the apartment building and doesn’t want to make money flipping it.
Buying an apartment building and making the necessary improvements on it so that you can easily sell it is one of the best ways to make a serious profit in the real estate market. Making a bigger profit is easier to do when talking about a higher priced property like an apartment building than if you were to consider investing in single family homes.
Let’s say you are going to make a 10% return on your investment no matter if you invest in apartment buildings or in single family homes. Which return would you rather realize? The 10% on the $900,000 apartment building or the one on the $125,000 single family home? The answer is obvious and it can be realized much easier on an apartment building than a single family home.
When you fix up a house and want to sell it, you are dealing with a person who is looking to live there. When you make improvements to an apartment building and want to sell it, you are dealing with many investors who want to make a positive cash flow by owning the apartment building.
You can easily raise the value of an apartment building by finding one that isn’t operated efficiently and has rents that are below the average for the area that you can buy for a good price. This is easier than it sounds.
You then make the renovations needed to fill the vacancies in the building and raise the rents as leases come due to the average for the area to increase the building’s income. You have just increased the selling price of this apartment building.
If the units are nice already but the rents are lower than the average for the area, you can add shed units or carports for the tenants and let them know that improvements are being made and their rent will be higher when their leases are up, but they are still comparable to other apartments in the area.
The investor who buys this apartment building from you will be looking at one thing. The capitalization rate or the net returns on their purchase price before their loan payments. If you can make an apartment building generate more income, you have ultimately raised the selling price a considerable amount and you will realize a nice return on your original investment.