If you are interested in investing in real estate, you may be wondering which particular sector to become involved with. There are both residential and commercial options to choose from. If you want to invest in buildings where people live, you will be putting your money in residential properties. When compared to investing in single-family dwellings, there are certainly some advantages of investing in residential apartment complexes. Here are the top four reasons that may convince you that this kind of investment is for you.
The first advantage is your level of cash flow. Even when people move out, your stream of income is not put on a standstill-it simply is reduced. Vacancies result in others paying at least a portion of the rent in the place of moved-out tenants. Then, when someone new moves in, it could actually result in a benefit because the new tenants are likely to pay higher rent.
In general, all kinds of real estate appreciate in value as long as proper maintenance is included in the equation. However, it may be easier to improve the value of residential apartment complexes than single-family homes. It is an excellent combination that by adding conveniences for residents, such as laundry rooms, vending machines, and rentable storage facilities, the value of the property goes up while providing you with an additional source of income from your efforts of investing in residential apartment complexes.
Commercial loans are used for the financing of these kinds of investments. Most commercial lenders will take the potential profitability of the property into account when they decide whether to approve your request for a loan or not. The best part is that commercial loans for investing in residential apartment complexes are usually non-recourse, which means that you will not be personally liable for the debt if the deal goes south. Residential loans, on the other hand, show up on your personal credit report.
The final benefit of investing in residential apartment complexes instead of single-family homes is that, at least for large apartment complexes, there is a professional management team that takes care of the regular day-to-day operations of the property. This improves property value and decreases the owner’s responsibility. Keep in mind that hiring a reliable management team will be the key to this benefit working out for out. A poor management company could result in a disastrous situation for your investment.