The first thing to understand is that apartments with 5+ doors are considered commercial property rather than residential. Therefore valuation when buying apartment buildings is calculated using different methods than what a single family investor uses. It is not uncommon for sellers to not have the best records to share with you, so it will be important for you to gather what you can and then project for what is missing.
Property management is a full-time occupation and is often not accounted for in projecting expenses. Whether you are hiring a property manager or managing yourself, the cost still must be accounted for in your initial due diligence. There are a great number of details to coordinate in the process leading to a successful commercial real estate purchase, so don’t be afraid to enlist some help through a real estate professional or an experienced partner. The bottom line is you are seeking deals that bring the best return possible for your investment dollar. We will cover the top 5 things to look for when buying apartment buildings in Kansas City .
An essential factor for determining value in commercial real estate is the vacancy rate. It is a crucial element to calculate when buying apartment buildings in Kansas City . Calculation of vacancy includes units that are currently sitting empty and ready to rent and units that await repairs or maintenance. You’ll want to find properties with low vacancy rates, which means the real estate is desirable to people or have a plan to improve the property so that it will become desirable.
Tenant turnover, which does impact your vacancy rate, is how often are tenants leaving the units causing them to need to be re-rented. The turnover can be averaged and the resulting number needs to be plugged into your calculations when determining if the transaction is right for you. Empty units mean a loss, so you will want to be sure that you have become well acquainted with this equation.
Preventative maintenance schedules, repair records and the apparent condition of the property are essential things to look for when buying apartment buildings in Kansas City . By understanding the norms of property management, you will understand when the data is showing you red flags, such as a lack of regularly scheduled maintenance of the equipment and systems. It is extremely important to review every aspect of the property and inspect everything down to every door knob and light fixture.
Return on investment (ROI) is how much return you want on the amount that you invest in a property. All investors have their own expected ROI when they are investing, so you have to come up with what is right for you. Typically investors are looking for at least 10%-12% ROI performance of their investment dollar.
There are many approaches and formulas used when it comes to understanding just what the proper price point is for commercial real estate. You will want to know the market well and the neighborhoods where apartment buildings in Kansas City are located. You will want to be looking for properties that are priced right, most especially bargains so it is important to understand the math. Because real estate is far more than just a number, it is wise to seek someone with experience to guide you through the process.
At Mastiff Home Buyers , we can answer any question or concern you may have, we are happy to help you build your commercial real estate portfolio. If you’d like to leave the worries to us and earn passive income, let Mastiff Home Buyers wear all of the hats, we are very familiar with all of the things to look for when buying apartment buildings in Kansas City . Send us a message or call (816) 535-0076 today!