subject: Apartment Real Estate Investing [print this page] One of the easier types of real estate investment for the most part when first starting out is perhaps apartment real estate investing. There are a couple of reasons for this. First off though it also has to be realized that there are far more responsibilities with this type of investment and potentially more risk.
Benefit #1 You will not only have your initial investment, which should build equity over the long term, but you will have the steady income from the rental units themselves.
Benefit #2 Predictability is an important issue with this type of investment. With rental apartments there are usually leases involved. Most often for twelve months and at the least six months. This allows you to have some security with the kind of cash flow the apartments will generate provided they are rented to full capacity.
Benefit #3 Shelter is always something that is required. Its not something that comes and go. Naturally it fluctuates with the economy. Normally when the economy is good people tend to buy homes more so than rent, but there is never a shortage of residents if the location and circumstances are right.
Greater Responsibilities With this type of investment you need to be involved in constant maintenance and up keep. As tenants move in and out there is the need for renovation. Then in some cases there can be extensive damage that requires repair. You also have to be reachable. Tenants must have a way of getting in touch with you if there is a problem, or you will need to hire a superintendent to oversee the tenants' needs.
Risk Factors of apartment real estate investing Although there are risk factors in any investment there are some additional ones when it comes to apartment real estate investing. Most of this is in relation to the expenses that are ongoing. Even though you have a cash flow you are also going to have expenses. We already mentioned the repairs and upkeep. Then there is insurance, maintenance costs and utilities.
Perhaps you have included the cost of the utilities in the rent amount. This is fine as long as there is not a significant increase in these amounts.
Overall when you weigh out the benefits of apartment real estate investing against the risk factors the benefits really do outweigh the risks. The biggest concern here is the demand on your time. If you are not prepared to oversee the operation of the building then you have to be prepared to incur the cost of staff to do it for you.
by: Michel Lautensack
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