Over the years, investing in real estate has proven to be a lucrative investment option for investors country-wide. And while single-family homes are the more common property option, more investors are now leaning towards apartment complexes.
So, are they the ideal property investment choice? Read what the experienced team from Sapphire Capital Investment has to say on the matter.
Economies of Scale
To understand economies of scale, the simple phrase ‘bigger is always better’ can be used. Economies of scale are cost advantages that are enjoyed by large companies/ entities.
Thus larger entities will enjoy more savings as they are able to spread these costs over more units; increasing efficiency, lowering costs, and increasing profits while maintaining the quality of production or service.
Regardless of your investment goal in real estate, achieving it is hedged on the tenant turnover. In the case of a single-family residence, you can renovate, make it renter-ready, only for the property to remain vacant for the next two months. On the other hand, an apartment complex reduces the overall risk that you are exposed to.
Additional streams of income
Another aspect where apartment complexes trump single-family residence options is supplementary income. With many tenants in the same space, a property owner can offer some conveniences at a fee. These additional sources of income can make a serious dent on your spreadsheet come to the end of the month.
Some of the additional income sources include parking (for residents and non-residents), vending machines, laundry machines, and Wi-Fi services.
The opportunity for partnerships
It comes as no surprise that a multi-rental property is more costly to afford. However, this avails the opportunity of possible partnerships. By investing as a group, you are reducing the risk to you. It also gives you the opportunity to purchase bigger properties, increasing the rental income.
Some tips for buying an apartment as an investment
- Understand the demographic; an owner vs renters’ analysis. This is key in understanding the demand for rental spaces in the area. It may make or break your investment.
- Our experienced team recommends that you look for a property with the right amount of light, a good view of the neighborhood, and practicality.
- Some outside space. With an increase in work from home, you should really consider a property with balconies or a terrace.
- Identify trends in the property market. Perform an in-depth study of what is happening in the apartment property market.
- Similar to investing in smaller properties, there are fees that crop up during and after the purchase. Make sure to do your research and have some money set aside.
Talk to the experts
Just because an apartment complex is a good investment choice doesn’t mean there is no room for careful consideration. There are several factors that should be taken into accounts such as location, economic market trends, financing, and investment strategies.
To help you navigate the murky waters, contact Sapphire Capital Investment LLC. We are the leading service providers in Tucson, providing investors with sound, professional advice on the buying and selling of property.