How to Evaluate Apartment Buildings for Sale
Owning apartment buildings can be a great investment. Smaller units require a more hands-on owner or manager, while larger units can be managed from afar. Whatever your goals in apartment investing, choosing a good unit is key to capitalizing on your investment.
Other People Are Reading
Things You'll Need
- Apartment rental guide
- Realtor specs
- Real estate records
- Digital camera
Instructions
-
-
1
Read about your potential investment as it's advertised in a local apartment guide. See what features are highlighted and what rental prices are offered. You might even call the property manager and ask what their best deals and features are to get a preliminary idea of how this property is handled and marketed.
-
2
Do a walk-through visual inspection of the property, with your realtor, friend or family member who is familiar with architecture or building inspections. Look at the outside of the property.Check roofs, landscaping, driveways and parking areas for any obvious damage or repair needs. Inside the buildings, check the electrical system (its age and dates of updates), heating and cooling systems, water pipes, maintenance rooms and laundry facilities.
-
-
3
Visit the units as well, even if they are occupied. (Get permission to enter an occupied unit). If there are multiple buildings to the complex, visit apartments in each building. Take notes on any obvious repair needs or poor condition items within units and for the whole building. Compare the repair or replacement cost of these items with the seller's asking price.
-
4
Perform due diligence on the owner's financials. Get the public record information and the seller's financial information about vacancy patterns, turnover, gas and water bills, maintenance fees, manager's fees, insurance and property taxes. These are items add specific data to general income and loss numbers. Find out what updates or improvements the owner has made to the building or units and when these were completed.
-
5
Compare this property to similar properties in the same area. Use public record information to find out about nearby apartment buildings' income and expenses, property taxes and turnover/vacancy rates. If any nearby apartment buildings have recently sold, or are currently for sale, compare and contrast the properties and their prices.
-
6
Speak separately with the property manager and the maintenance staff if they are not the same as the owner. Get their perspective on the units and property, including any concerns or recent changes that have been made to the property.
-
7
Visit a second time if the property still interests you. Take pictures of significant structures and items with a digital camera. Pay for professional inspections if you are close to bidding on this property. These will give you any indication about electrical, furnace, pest or water concerns that perhaps went unnoticed in your walk-through.
-
1
Tips & Warnings
Drive or walk around the neighborhood at various times of day to see what the surrounding area offers and what kind of atmosphere it has. Consider your long-range plans including how long you will keep the property, how involved in it you will be and how you will get out of owning it when you are done.
Never take someone's word about general profits and losses without getting specific line items of income and expenses. Double-check these with a neutral source, like public records found at the library.
