Why Buy Apartment Buildings?

By Rob Mann Commercial Realto

Whether you are looking for your upleg in a 1031 Exchange or just looking for an investment to own, there are many reasons why an apartment building might be a good choice for you.

If you know that you want to invest in real estate, why choose an apartment building. As stated before, there are a number of reasons but here are the two most important from a financial point of view: low risk and upside potential.

Low Risk.  Maybe you’ve heard the old saying “everyone always needs a place to live.” That saying is never more true than when investing in apartment buildings. The idea of this plays to the risk you take when buying which is very little, because if ever you can’t rent a unit, just lower the price a little.  The same is not true for any other asset type.

Upside Potential.  Most apartment rents raise every year, this is called compounded returns.  The best investments compound even small percentages because that income potential is very powerful. Even in rent controlled areas the upside potential is what everyone looks for.  If there is a large gap between the property’s current rents and it’s market rents even better.  But without a doubt, the best buildings to buy are non-rent-controlled.  This allows an investor to “ride the market up in the good times” and down in the bad times (without the risk of keeping rents where they are forever).

Simplicity.  Apartment buildings are simple.  The leases are simple, the ownership is simple, and the maintenance is simple.  Unlike other properties that deal in large corporations and their attorney’s, apartment buildings deal with common every-day people who are just looking for a place to live.