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Multifamily Apartment Complex Investing | Properties for Sale

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Done properly, real estate investing is a great way for investors to grow their wealth. However, this requires a refined understanding of how it works—including the potential risks and rewards.

As a whole, real estate is a flexible investment type. There are many ways to invest in it, and investors have a lot of strategies to choose from, depending on their investment goals. Some real estate investors grow their wealth by flipping houses. Others do so by investing in office space, retail, or industrial properties.

Here we are going to focus on multifamily real estate investing, particularly apartment complex investing. Investing in apartments is one of the best strategies for investors who want an additional source of monthly income. It provides a slow but steady appreciation in the value of their portfolio. Investing in apartments can offer several distinct advantages.

Multifamily Apartment Buildings for Sale

Apartment complexes fall under the category of multifamily real estate. As opposed to single-family properties that only have one unit, multifamily properties have two or more units under one roof. This means multiple families can live together in the same property by renting the units.

Investors can earn a steady income by purchasing an apartment and having tenants move in. It’s easy to see the appeal of multifamily properties for real estate investors. Because there are multiple units, there are several streams of income coming from your renters on a monthly basis.

Multifamily properties are commonly known as apartment complexes, but this could also be any building with more than one rentable space. This includes duplexes, triplexes, four-plexes, apartments, and condominiums. [1]

Smaller homes tend to have fewer barriers to entry compared to multifamily real estate, but the benefits of investing in the latter are undeniable.

Why People Invest in Apartment Complexes

Investors go for apartment complexes because they generate a dependable stream of income. These multifamily properties are able to generate positive cash flow that is higher than what you would normally get out of stock dividend yields. A property investment is generally safer and provides greater return on investment (ROI) over time compared to a stock that can be volatile or uncertain. Investing in rental property gives you a safe and regular income stream. [2]

Real estate investors can also build a large portfolio of rental units in no time by investing in multifamily real estate. It is much easier to acquire and manage a 20-unit apartment complex than to acquire 20 different single-family units in various locations.

For investors who want to outsource property management, it is also more reasonable to hire an external property manager when you have a multifamily property that brings in monthly income. Investors who own single-family homes may not produce as much income to justify doing the same.

Are Multifamily Properties a Good Investment?

In order to determine whether or not multifamily real estate is a good investment, we need to take a look at its pros and cons.

Multifamily properties produce a monthly cash flow, which is one of its most appealing qualities for real estate investors. Rents are predictable and consistent. And because there are several units in a single property, vacancies are rare. Even if one or two units become vacant, the remaining units that are occupied can still produce income. Compare this with single-family homes that get no cash flow when the unit becomes vacant.

Investors love having an apartment complex that provides passive income. It’s easy to hire a property manager so you don’t have to get involved in the day-to-day responsibilities of being a landlord. This is especially appealing to investors with little to no experience when it comes to managing rental property. [3]

Of course, there are still plenty of decisions to be made so it is not truly a passive investment, but it is less involved than other real estate investment strategies such as flipping houses.

Multifamily real estate properties also tend to appreciate over time. They are more resilient to economic downturns. Although it won’t always appreciate in value, it is worth noting that apartment complexes typically appreciate in the long run. Even as real estate values ebb and flow, multifamily real estate values tend to climb. [3]

This is one of many reasons why apartments are considered the “safe” investment option. Even in times of economic downturn, people will always need a place to live. During a recession, many people have to sell their homes and move into rental housing. There is always demand for multifamily properties. If your investment property is well-located, the place practically sells itself—no need for additional marketing expenses.

Investing in a multifamily real estate property also involves fewer loans. Securing a loan for a single 10-unit property is easier than funding 10 separate single-unit homes. While the former will only need one loan, the latter will require ten separate loans, which may be difficult to track over time. [3]

Finally, multifamily properties are also highly tax advantaged. Most investors use a mortgage to finance the property. They can then take a deduction for mortgage interest paid during that fiscal year, which is usually higher in the first years of ownership as the loan begins to amortize. Even if the property technically appreciates in value, they can be depreciated over a certain period of time. This depreciation can offset a significant portion of the rental income collected each year. [3]

These pros are balanced out by a few drawbacks that investors should know about. For instance, managing the property could be more difficult because of the number of units in the property. Unless you hire an external property management company, playing the role of landlord can be difficult. It is possible to outsource property management, but this is not enough to make it a passive investment.

Additionally, multifamily apartment complexes are also generally more expensive compared to single-family homes. They may be harder to purchase for a single investor because of the large barrier to entry. Even a two-unit apartment building in New York, San Francisco, or Boston can cost over a million dollars. [3]

A lot of banks will require a down payment of at least 20%. It’s not easy to come up with that amount of money, especially for the average investor. Keep in mind that this is also a bull market where a lot of investors compete for the same multifamily property. This means prices are even higher.

Multifamily properties tend to attract the attention of experienced investors. This means there is a lot of competition involved. It can be an intense scene for average investors. It’s no surprise given that multifamily real estate can be very lucrative.

So overall, we can say that multifamily real estate investing is a good investment but it is not for everyone. It is highly competitive and involves a lot of management. But there is no denying that purchasing an apartment complex can be highly profitable, which is why many investors go for it.

Do Multifamily Properties and Apartment Complexes Appreciate?

In real estate, appreciation refers to how much a property’s value increases over time. If a property appreciates and gains value, the investor can gain more from selling the property. This means the investor can command a higher sales price and bring in more profit if the demand is strong in the market. The speed of a property’s appreciation depends on a number of factors such as location, interest rates, and housing market condition, among others. [4]

Multifamily rental properties tend to appreciate in value over time. They usually meet or even exceed other investment types in this regard.

Apartment complexes can increase in value as the net operating income improves through rent increase or effective asset management. Maintaining the property is very important. Minor repairs should be performed regularly and the grounds must be kept. Doing your due diligence is important so that your property appreciates in value. [2]

How Much Does It Cost to Buy an Apartment Building?

The cost is one of the biggest barriers to entry for most investors looking into multifamily real estate investing. A smaller apartment building may cost around $500,000 to $750,000. A mid-size or large apartment complex will cost several million dollars. The cost of an apartment building depends on factors such as the age of the building, the location, and the type of property. Class A properties are high-quality apartments in good neighborhoods—so expect these properties to be pricier. [5]

The good news is that apartment complexes are generally easier to finance compared to single-family homes. Traditional lenders are more likely to approve a loan, but will usually require a large down payment.

There is also the option of multifamily syndication, which solves a lot of the problems and drawbacks of multifamily real estate investing. We will discuss this in detail later on.

Is it Profitable to Own Apartments?

There are multiple reasons why apartment complexes are considered profitable. They generate a consistent and multiplied income stream which you can depend on. Vacancies are rare, especially if the apartment is in a good neighborhood and in close proximity to schools, malls, restaurants, transportation, cultural centers, etc. Even if a unit becomes vacant, it is not likely to stay that way for a long time. Therefore, you can have more cash flow each month than if you were renting out a single-family home. This guaranteed income is also the reason why lenders do not hesitate to lend real estate investors the money to invest in apartments. [6]

Investors can also build equity faster by having multiple sources of rental income. It will allow investors to repay their mortgage faster and build equity over the property.

Apartment complexes are also profitable thanks to their multiple tax advantages and the slow and steady property appreciation.

Overall, multifamily real estate investing is a safe and consistent type of investment that mitigates the risk of any losses in the future.

Work with BAM Capital for Multifamily Apartment Investing

Cost and property management are the two main drawbacks of multifamily real estate investing. There is a large barrier to entry and a fierce competition to actually acquire the property. It is also no small feat to manage an apartment complex with multiple units and numerous tenants. You have to deal with emergencies, repairs, and tenant concerns. Even if you outsource property management, you still have to be actively involved in the apartment. But multifamily syndication solves a lot of these problems.

A multifamily syndication is when multiple investors pool their resources together in order to purchase a single multifamily real estate property. A syndicator, also known as the sponsor, puts the deal together, manages the financing, and makes all the decisions necessary. They then look for passive investors who will participate in the syndication and provide most of the capital. Once the deal is closed, the syndicator also manages the investment. Passive investors only have to supply the capital in exchange for equity in the real estate and monthly cash flow. [7]

Multifamily syndication is for investors who want all the benefits of multifamily investing without the responsibilities of being a landlord. Most investors don’t have the time or experience to do so. Some of them simply have no interest in being a landlord. But in a syndication deal, the syndicator handles property management for you.

Multifamily syndication has grown in popularity in recent years and for good reason. If you have been turned off by the idea of becoming a landlord, then this might be the investment strategy for you. You can purchase apartment complexes that are normally too expensive.

If you want to invest in multifamily apartment complexes without the headache of running them yourself, you should work with BAM Capital.

BAM Capital is an Indianapolis-based syndicator that has a strong Midwest focus. It allows investors to enjoy an award-winning multifamily investment strategy that grows your wealth through syndication.

BAM Capital has a consistent track record and a solid business plan, prioritizing Class A, A-, and B++ multifamily properties. You no longer have to look for an investment property by yourself. Their main goal is to mitigate investor risk, create forced appreciation, and provide a safe and passive investment for their investors. [8]

BAM Capital negotiates the purchasing and financing of high quality multifamily properties on behalf of passive investors. Their vertical integration strategy has worked wonders for the company so far. In fact, BAM Capital currently has $700 million AUM and 5,000 units. [8]

Accredited investors can schedule a call with BAM Capital and invest today.

 

 

BAM Multifamily Growth & Income Fund III

BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.

  • Consistent passive income
    Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.
  • Significant tax benefits
    A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.
  • Vertically integrated company
    In-house property management and construction allow for predictable cost reduction and value add.

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The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.  

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