How to Buy an Apartment Building

Buying an investment property is a little different that purchasing a home with a traditional mortgage. It can be a very profitable business venture, but only if it is done correctly! If you want to know how to buy an apartment building, the first thing you need to determine is the actual returns that will come back to you after becoming the owner. Unless you can prove that the apartment building is profitable, a lender is not likely to finance your business plan.

What else do you need to know?

Shop Around For Your Loan

Although it might seem tempting to take the first offer a lender gives you for the new apartment building, it is important to shop around for your loan. You'll also want to consider whether or not you should pursue a recourse or a non-recourse type of loan.

Recourse Loan: This type of loan is a lot like the traditional mortgage. If you are unable to meet the terms and conditions of the agreement you sign to obtain funding, then you will be held personally liable by the lender and all of your wealth will be at risk.

Non-recourse Loan: This type of loan gives an apartment owner a limited level of liability when it comes to their building. A lender will simply take the property in question if this loan goes into a default status, but that is the only thing that can happen. A lender cannot hold you personally responsible and so your wealth will be protected.

So which loan is right for your new apartment building? Unless the property you're planning on purchasing right now is worth $2.5 million or more, you will not qualify for a non-recourse loan. Plan on having at least 20% of the down payment on hand as well so that you'll be able to receive favorable lending terms.

How Do You Find the Right Building?

Finding the right apartment building is the other critical component to the purchasing process. It's a lot more difficult to find a quality investment opportunity than just looking up local buildings online from your home office! You've got to get to know the buildings and network with other local investors to make sure the apartments you're thinking about purchasing are a good deal.

Is it possible to purchase an apartment building without any money right now? In some specific instances that may be possible, but you aren't going to get a 100% loan from a lender most likely, even if the property in question is immediately profitable. You would need to find additional investors who would be willing to front you the money you need in order to complete the purchase.

A major component of owning an apartment building is to be able to maintain it properly. This will mean setting up relationships with local vendors who can come supply plumbing, electrical, HVAC, and other repairs during emergency situations. In most instances, you only have 24 hours to have health and safety repairs completed, so this final step will help you become successful.

Are you ready to buy an apartment building? Then let's use this information to start hunting.
Posted on Jun 23, 2014


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