When purchasing an apartment building, consider the following:
- Make sure that the building is in a stable area. Purchasing an apartment building in a blighted area where the price of real estate is decreasing is not prudent. You will want to buy an apartment building in an area where the home prices are stable or appreciating. This will cost more money, but you will be getting more out of your commercial real estate investment in this way;
- Do a home inspection before you even think about closing on the property. You may have to pay for this if the seller does not offer it, but it is worth it. You do not want to purchase property that is falling apart or needs extensive repairs. A home inspection is a wise idea when investing in any real estate structure, including commercial property;
- Get a survey and a title commitment. The survey will show the property lines and make sure there are no other buildings encroaching on the property. The title insurance will reflect the current owner, any liens, encumbrances, unpaid taxes and covenants or restrictions. Covenants and restrictions are often placed on multi family property. This can include such things as “no hanging clothes on the balcony” to “no antennas on the roof.” If you are unfamiliar with reading a title commitment or survey, hire an attorney with experience in multi family commercial real estate investing;
- Make sure you see the leases and you should even interview the tenants to see if they are happy with living in the building, if there are any problems and if they plan on staying.
- Figure out who is going to maintain the property. This will include shoveling snow, salting the driveway, cutting the grass and basic repairs in the building. You can do this yourself, if you are handy, or you can offer one of your tenants a discount in rent by agreeing to take on this job.
These are the most important aspects when purchasing an apartment building. Many people, when seeking to invest in commercial real estate, prefer working with apartment buildings, particularly if they are handy and can do basic maintenance in the building. Remember that your tenants will look to you if anything goes wrong in the building. You will be required to make sure that your tenants have hot water and heat or else you may be in violation of several municipal, state and federal laws.
You also have to know the lease laws when purchasing an apartment building for a commercial real estate investment. Lease laws vary from state to state as far as the responsibilities of both tenant and landlord, but federal laws prohibit any form of discrimination based on a variety of conditions. You must be familiar with these laws before even thinking of leasing property or purchasing an apartment building.
If you are handy and can do basic home maintenance, and better yet – if you plan on living in the building where you can keep track of what is going on, buying an apartment building can be a good way to get started in commercial real estate investing.