Apartment complexes present a lucrative opportunity for investors. Owners that act as the property manager reduce overhead costs and maintain more control over their property. Researching the market and analyzing the data for the area and the property show the buyer how much they can expect to earn.
What Loan is Available for Buying an Apartment Complex?
Fannie Mae apartment loans are available to investors with a credit score of at least 680 and a debt-to-income ratio of 36%. The buyer must pay at least 20% down to secure the loan. Lenders can provide a 30-year fixed-rate mortgage to buy the apartment complex. However, the property must be inspected, and all issues must be corrected before the closing.
Moderate Rehabilitation Supplemental Loans
Investors can secure capital from a lender to complete renovations of the apartment complex. Financing the rehabilitation starts at 75% of the total financed, and the buyer must provide a down payment of at least 25% to secure the renovation capital. The product is available through government lenders and provides all the typical benefits buyers expect.
Is the Buyer Living On-Site?
However, if the buyer decides they want to live on-site, they can acquire an FHA mortgage for smaller properties. The mortgage program has a cap for commercial properties, and the buyer must live in the property for the full duration of their mortgage. However, if the property offers 30 or more units, the buyer must consider mortgage options that don’t impose restrictions. When starting the mortgage, the buyer must provide up to four years of tax returns to establish their ability to repay the loan.
What Amenities Are Available to Tenants?
Apartment complexes provide a variety of amenities for apartment tenants. The most common amenities are gyms, swimming pools, hot tubs, laundry facilities, and free parking. If the buyer wants to add luxury amenities, they can review their budget and determine if they have enough capital to complete these upgrades. Investors can review more information about upgrading a property by reading this article about NRIA right now.
Hiring an Attorney to Create Rental Agreements
An attorney provides legally binding rental agreements and knows what terms protect the investor more fully. They must discuss the rules and guidelines for the property before creating the lease. The property owner must define what rules apply to all tenants and what terms could present grounds for eviction.
Lawyers recommend including renter’s insurance in the terms to protect the property against tenant-related damage. Any owners that allow pets on the property need to include clauses for pet damage. Limiting the tenants to two pets can reduce the risk of damage dramatically.
Real property investments start with careful research, and the investors must acquire specific details about the location. The demand for rental property defines how much the investor could earn by owning an apartment complex. Purchasing an existing property lowers upfront costs and could provide an immediate opportunity to earn residual income. Investors can learn more about financing and renting apartment complexes by contacting an advisor now.