This can be a boon for those who have investments in the apartment industry. While this is not recommending that you go out and purchase an apartment complex, you may want to look at some interests in the apartment sector. One way to do this is through real estate investment trusts or REITs.
A REIT is a fund that shareholders purchase a portion of in order to become part of a real estate investment group. It could be that it is a real estate construction group that is going to build a new apartment complex or perhaps you would prefer to get in with a real estate management group that is already running a complex.
The way you make money from REITs is through the money they make from their customers. The more people are renting those units, the more money the REIT makes. In the United States, REITs must give at least 90% of the profits they make in a year back to their investors.
With the numbers of people losing homes and moving into apartments that means there well could be a number of new leases being started up. That translates into more profit for you in those dividends from the funds.
Before you jump into anything, it's wise to do your research and know what you are getting into. In this case that means getting to better know the world of REITs and finding out what is out there and how they have been performing.
Begin this research by going to REITBuyer.com. This is a website that will have all the ins and outs of REIT buying as well as a lot of great tips and tools to help you in your investment purchases.
As you look through past performances, make sure you also look at overall market movements in that time period. Remember, we are coming out of an economic tough time and that means things will still look a bit rocky. But you are also looking at a market that may start to get better because of this situation.
Next, you will have to choose which REITs to purchase and make the buy. With REITBuyer.com you can do that all in one place as in addition to being an information source they are also a complete investment real estate broker.
This article was written by Earl E. Bird, spokesperson for the REITbuyer.com, a site dedicated to educating Real Estate Investors on how to invest in Real Estate Mutual Funds to diversify their investing portfolio. Learn more at http://www.reitbuyer.com
Real Estate investors are flooding back to the market, buying residential pre-foreclosures at a 20-30% discount. Single family homes are the focus of most investor portfolios and residential properties seem to get all the media attention. Naturally, investors feel more comfortable buying what they know and avoid seemingly different or more complicated products. Fortunately for savvy investors, apartment buildings don't get the press they deserve and common misconceptions scare main-stream investors away from these cash-flow monsters. Here are 6 of the most common misconceptions people have about investing in apartment buildings and the money-making truth.
Misconception #1: You need highly specialized knowledge - Just like with residential investing, it pays to surround yourself with a good team of professionals that can help make good decisions. What most people don't realize is that residential real estate professionals are rarely investment experts. In an apartment transaction, commercial real estate professionals strictly view the property as an investment. If a deal doesn't make financial sense, both the buying agent and the lender should stop the transaction.
Misconception #2: You need good credit - When applying for an apartment loan, banks look much less at the borrower and more at the property. If the property cash-flows adequately, you can get financing with a 600 credit score. Loans are available up to 90% of the purchase price and some lenders don't require verification of income or assets, making it easy for first-time investors to get in the game.
Misconception #3: You need a lot of time - In most cases, the time spent acquiring an apartment building is equal to that of a single home purchase. However, when you consider that you can purchase 30 units in a single apartment building transaction versus the time (and additional costs) it would take to purchase 30 individual homes, apartment buildings have superior economies of. Keeping everything under one roof also makes maintenance of an apartment building relatively easier. There is only one roof that can leak, one yard to maintain and one pool to fix. So the economies of scale save you not only time, but also money.
Misconception #4: You need experience - No experience is required and a good real estate team can make buying an apartment building simple. Financing is available for first-time investors and streamlined loan processes make approvals quick and inexpensive.
Misconception #5: The deals are harder to do - A commercial real estate contract is written a little different than a residential contract but the differences are subtle. Because apartment buildings are rental properties, data is available from the current owner to support the net income and determine the cash flow of the property. Additional time is provided to complete due diligence and secure financing.
Misconception #6: There are a lot of tenant problems - Rule #1 in becoming an apartment building investor is to never directly manage the property. Hire a property management company that gets paid on a % of the gross rent received to handle filling the property and managing tenants. If you set things up right, you will never have to meet a tenant or deal with a problem.
When shopping for an apartment building, some unique terms are used to describe the investment opportunity. Investors buy and sell properties based on Cap Rates. Cap Rate = Net Operating Income/Sales Price. The resulting percentage is usually disclosed by the selling agent and used to determine if the property is producing income above or below market value. If rents in the area are increasing, the Cap Rate % will be higher assuming the sales price stays equal. Cap rates in more upscale communities are typically in the 5-6% range but cap rates can be 11% for discounted properties that still have average rental income.
With lending guidelines tightening on residential properties and personal income increasing for Americans, rents are expected to climb in growing markets. This will make apartment buildings an even more attractive investment over the next 3 years.
Both Robert Shumake & Brett Nordin are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Robert Shumake has sinced written about articles on various topics from Best Mutual Funds, Property Investment and Best Mutual Funds. Robert Shumake's mission is to inform the public about mortgage fraud and real estate scams and to provide tips on how to avoid being a victim. ?Sometimes people will commit identity theft to obtain a housing loan, sell someone else's house or take over. Robert Shumake's top article generates over 6600 views. to your Favourites.
Brett Nordin has sinced written about articles on various topics from Property Investment, Credit Loans and Network Marketing. Learn more free buying tips and strategies, . Brett Nordin is veteran mortgage broker who is on a mission to raise the ethical bar of mortgage professionals throu. Brett Nordin's top article generates over 22200 views. to your Favourites.