Our favorite investment vehicle is single family residential units. For proper diversification we suggest you spread your portfolio over a broad geographic area. But for our truly motivated investors who want to go big time, it can become something of a chore to keep up with the management of all those individual homes, especially if, say, you own about 30 of them.
At this point, and maybe even sooner, it becomes an option to expand your investments to include multi-family housing units like an apartment building. You shouldn’t begin your real estate investing with apartment complexes unless you can afford to buy several in different markets but, assuming you’ve covered yourself with good diversity in your single family homes, it’s okay to consider multi-housing units as the next logical step in your portfolio growth.
A complete guide to Investing in apartment units is beyond the scope of this simple article but there are a few basic differences we can mention. Unlike single family houses, you don’t get to physically inspect the place until your offer is accepted. At that point you are given access to the property and MUST perform your due diligence.
The good thing about apartments is that the property does most of the qualifying for you. Lenders look at the cash flow of the building more than your personal credit. The lender will also do their own appraisal and due diligence before they issue a loan against the value of the appraisal – not the purchase price. If it comes up short, you may have to plunk down a larger down payment than you anticipated.
Think you’re ready for multi-family housing investing? Don’t forget to check with your Empowered Investor Investment Counselor before you pull the trigger.
