Apart from all other commitments that you make in life, investing in an apartment is a major decision to make. In fact, investment geniuses feel that it’s not just an investment strategy but a career where significant moves are to be made. It is likely that investors might find managing investments in apartment to be a tad difficult and something that demands a strong involvement compared to managing a unit of single family, both financially and physically. On the other end, investing in an apartment building has its own set of benefits compared to other niches. Read on to find out if owning a complex is the right decision for you, along with tips to get on with it successfully.
How to Zero On Your Decision in Buying an Apartment
It’s ever an easy call while looking to invest in an apartment building. However, one can familiarize himself by taking into account a few steps which makes the process a lot more approachable.
Knowing If Investing In An Apartment Is The Right Call – Whether you are a newbie in real estate investment or have already built up quite a bit of portfolio, it’s never late to reconsider if it’s the right decision for you. Among all other conditions, two most crucial considerations-time and money. The cost of buying an apartment involves one having to pay the capital amount. Besides, one needs to be ready to meet with any upkeep or maintenance costs as and when needed. So, before you take the plunge it is absolutely necessary that you mull over your schedule and finances.
Determining Apartment Type and Considering ROI–Apartments; they come in a variety of shapes and sizes like 2BHK or 3BHK. Now, depending on your family size and your requirement status, you should weigh the pros and con of the location and the building before your shell out money. Also, if you are planning to buy ne for investment purpose, you will need to run math across the ROI factors ad whether they apply to the location and the building type that’s there. Moreover, it is quite likely that as an investor you face a trade off between cost of repair and renovation and the purchase price itself.
If you choose to invest in a small apartment, it will be always more affordable compared to properties that have multiple units with similar amenities. Owing to the size alone, one may generate varying rental income. Additionally, investors will always set out to evaluate the very cost of maintenance as well as repairs which is based on the age of the property, if it’s a resale deal.
Identifying the right kind of property–After you have determined the kind of apartment that you want to buy or live in, it’s time to hunt down a suitable property. Now, there are two ways to go about it. Work solo or take the help of a professional broker. By networking with local brokers, it is likely that you might come across a fellow investor who is interested to make a sale or who is also hunting a property similar to you. Tell you what, dedicated real estate agents are a different breed altogether. If you get on them in the perfect ally, they can be real helpful as they have access to multiple listings. However, one has to pay a little high commission fee for buying an apartment which is slight higher than other initial deals. These days, hunting an apartment has become easier with online search. For instance, if you have been hunting for 2BHK and 3BHK Flats on B.T. Road Kolkata across Google, you will be presented with a long list of results matching your query. However, it’s always advised that you refrain yourself from booking online and pay a physical visit to the property before investing.
Due Diligence matters– Before one goes ahead with the offer on any property, it is highly advised that investors perform their due diligence in running an in depth analysis. For any apartment purchase, there are a few factors to be taken into consideration which are as follows:
- The location of the property
- The total number of units
- Available amenities
- The age of the property
Taking all such factors into consideration, one is always better placed in adjudging the amount that one should pay for purchase.
Scoring the final deal –Before you make an offer, it is advised that you appraise the building value and run market comparison for similar properties. You might as well get in touch with experienced investors so as to gauge if the asking price is right. Whether the property qualifies for government backed loans or commercially available finance, it’s probably a good idea to be always prepared with the cash flow for interest charges. If you plan on buying solely for investment needs, it is required that you take into consideration the potential of occupancy in the area. While working on the finance option for the deal , it is a quite a trend that commercial lenders will lay more emphasis in accordance to one’s income potential compared to personal finances and one’s credit history.
The details of Construction– Don’t be surprised at the common problems of construction when you are out hunting a property. If you feel the material used is of poor or downgrade quality, hire a professional to look into the same and ensure that such issue won’t lead to heavy maintenance and repairs to bear in the future, after you have moved in or have rented out your apartment.
Knowing the rental roll–When you are looking to purchase an apartment with an intention to rent it out, it’s important to take the rent roll into consideration. A rent roll is basically the total amount of rent that is being charged for all units put together coupled with occupancy rate which offers an estimate of annual rental income. Further, when you divide the purchase price of the apartment by the total number of units will surely help in comparing different apartments of the same range. Accessing the rent roll will also give investors a chance to run a fair estimate of the operating income as they net out the expenses directly from the rent roll figure which is further used to figure out the rate of capitalization.