The answer to this question depends on your risk tolerance and on how sensitive the apartment complex might be to changes. Admittedly, rental houses all over town may be better than one set of apartments next to a military base that is constantly on the Defense Department closure list each year. That problem is manageable, however, by choosing locations that are not quite so vulnerable. The apartments will provide important economies of scale on your expenses. Maintenance, management fees, insurance, and major repairs are all cheaper for a thirty-unit apartment complex than for thirty rental houses.
You can sell the entire apartment complex to one buyer if you want, instead of trying to sell many different houses. Apartment owners are not usually area-sensitive. You can find buyers from outside your community and state, which is practically impossible with rental houses.
Satisfied tenants usually recommend your apartments to their friends. That word-of-mouth advertising and referral network happens much less often with single-family residences. If you want to refinance and pull out some equity for other investments, it is much easier with apartment complexes. Many lenders and many secondary market investment portfolios require that a certain percentage of their loans be in multi-family residential properties. They are considered very safe loans. As a result, it is relatively easy to refinance or place second mortgage loans on apartments.
Sometimes you can find smaller apartment complexes advertised in the local newspaper classifieds, or even in home magazines used by residential real estate agents. Commercial property online listing sites, such as LoopNet are also popular advertising methods.
Local commercial brokers should be knowledgeable regarding properties currently offered for sale. If you are actively looking for something to buy, prepare a short description of what you want, and distribute copies to all the apartment management companies you can find. The description should include your desired number of units, target market if applicable (seniors, students, etc.), and price range. If you intend to retain professional management, say that in your flyer.
Why? Because the management company will not be scared to tell you about purchase possibilities in its own portfolio, confident that it will probably not result in a loss of business to them. In addition, I find that management companies know all the gossip around town. If one thinks it can pick up a new account by giving you advice regarding buying a complex managed by another company, it will do so.
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