6 basic principles of owning an apartment building!

While it has historically been considered a quality and relatively safe investment property to own, it requires some knowledge, understanding, planning and careful selection of the right / suitable property! After more than 15 years as a licensed New York State real estate seller and someone who has invested in rental properties multiple times, I firmly believe that it is important and meaningful for potential investors to pay close attention to these 6 basic principles, about realities, etc.

one. Down payment, usually higher: When someone buys an apartment building if they don’t live in it, lenders view it differently in terms of how much down payment is required when using the mortgage as part of the purchase. While terms and conditions often differ, the typical mortgage for a single family home is 20% and for a non-owner home it is 25%.

2. Additional requirements / projected income / income / cash flow: Lenders, usually offering single-family home mortgages, base their decisions on the appraised value and a set of numbers, ratios, etc., which are believed to represent the borrower’s ability to afford repayment, etc. In multi-family scenarios the key requirement is based on projected rental income, expected income and cash flows. This is done to minimize the risks of the lender!

3. All costs: Know the full cost of owning and operating a particular property right from the start. These considerations should take into account: the owner’s responsibility for property taxes, utilities, maintenance, repairs, revenues, cleaning between tenants, maintenance of common areas and / or areas, etc. All these costs should be factored in when deciding whether to purchase a particular object. property!

4. 6% rule: I call the 6% rule a smart rule of thumb. This means that revenue (reported conservatively) minus all costs of ownership (paid monthly or averaged) is cash flow. This means that until the true cash flow is at least 6% positive!

5. Estimated load 75%: When you take into account when calculating the expected revenue, vacancies will appear, and get ready. So, after determining revenue using market rental rates, reduce the amount to 75% to accommodate contingencies!

6. Ease / demand for rent: Consider the specific real estate / rental market and, if difficult or difficult, when there are vacancies. Find out how long it takes on average to rent similar apartments in this geographic region!

Position yourself to make the wisest real estate decisions by considering at least these 6 important factors before investing in a particular property! Will you discipline yourself to become a wiser buyer / investor?

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