There are many success stories of people that got started investing in apartment buildings and built great wealth for their families. In fact, I started out as a prison guard, and have built a substantial investment business.
And you can too.
Following are 5 essentials of the apartment investment business. Take some time to reflect on each topic as you read through.
Your Investment Goals.
Everything begins with your investment goals. It is the first step to anything, really, but even more so with investing in apartments. This is because time is just as valuable as money. If you are chasing the wrong investments to meet your goals, you will lose precious time.
It all begins with defining what your criteria is – what do you want to get out of your investment? Do you want immediate cash flow…or is a big ‘payday’ in 5 or 10 years more important? It all depends on what you want to achieve, so begin with the end in mind.
Property analysis is as much art as it is science. Everything revolves around the numbers and the net operating income that the property produces for the investor. However, you must also take into account the property itself, the surrounding area, and the area in general. Are there sustainable jobs in the area? Is the area on an upward trend, or downward trend?
That all being said, the numbers are paramount in your analysis. Does this property meet your investment criteria previously defined? A ‘good deal’ for one investor may not be so great for another investor. It depends on your personal criteria – and the net operating income.
The Buying Process.
This comprises several sub-steps but to keep things simple here, I have categorized this as the buying process. Really this includes items such as identifying a property, negotiations, due diligence, property inspections, financing, and closing the deal.
Property management can make or break an investment. It is vitally important that things are run in a professional manner and the property is properly maintained. These everyday activities can either be done by you, or a professional management company. Either choice is fine, but you must decide whether you will be an active or passive investor. Again it goes back to your investment criteria and what you want to get out of the property.
Separately from property management is asset management. You are the CEO of your investment business, and everything should report up to you. It’s your investment at stake so treat it as such. Be sure that your property manager is performing their job well, and that rents are maximized, expenses are minimized, and the property is increasing in value over time. There is truly only one person that can do this job, and that is you. Your property manager will be focusing on the day-to-day activities, so your focus should be in increasing the net operating income and therefore, the property value.