Buying an apartment building can be a lucrative investment if you take the time to research the building and ask all the right questions. Below are the five most important questions you should ask before you invest in an apartment building to make sure you’re giving yourself the best possible opportunity to profit.
#1 – Why Are You Selling the Building?
Believe it or not, this is a question that investors don’t ask frequently enough – and it’s one that often causes them serious headaches in the long run, too. Figuring out why the current owner is ready to move on from his or her asset is critical to your understanding of the property as a whole. Reasons may include things like burnout, problems within the family, relocation, retirement, or even a new opportunity. They may also include back taxes, code violations, or other problems that will be difficult for you to overcome.
#2 – What is the Story of the Property?
Learning more about a property’s story can help you get a feel for what you can expect. For example, are you buying a 1920s bed-and-breakfast converted into apartments, or are you buying a building that was built, owned, and operated by the same family for decades? Each of these comes with unique negotiating points, so be sure that you take the time to learn more about the property before you buy any multifamily property.
#3 – How Long Have You Owned the Property & Do You Own Others?
Even if you have zero intention of buying any of the seller’s other assets, if you do manage to build good rapport with that seller – and if you inevitably purchase the building – he or she may come directly to you when the time comes to sell. There’s also the opportunity to talk the seller into giving you a “bundle discount” where you can get two or more properties for an even better deal.
#4 – How is Occupancy and What are the Tenants Like?
You’ll want to know whether all of the apartments tend to stay occupied throughout the year or if there are certain units that stay empty. You’ll also want to know whether the tenants living in the building are problematic tenants who cause damage or don’t pay on time, or if they’re ideal tenants who care for the property and pay their rent without fail. These things can make a tremendous difference, so don’t hesitate to ask to see proof of occupancy and rents paid – especially if you’re a first-time multifamily property buyer.
#5 – Am I Ready to be a Landlord/Property Manager?
When you buy a multifamily property like an apartment building, you have options available to you. If the building is filled with good tenants who pay on time – and who pay a solid rent for the area – then you may be able to hire someone to manage the property on your behalf. Otherwise, if you want to save that money and profit as much as possible, you can do all the managing. However, it’s a lot of work, and it’s critical that you’re ready to handle it before you sign the contract.
Buying an apartment building can be an exciting time in your life, and that’s especially true if you get a great deal on a building filled with excellent tenants who pay a decent rent for the area. Asking these five questions can help you avoid some of the problems that multifamily property owners experience, and they can also help make your investment far more profitable in the future.
