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Updated by Joanna James on Feb 18, 2020
Headline for How to Invest in an Apartment - Tips on How to Get Started in Apartment Investment
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Joanna James Joanna James
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How to Invest in an Apartment - Tips on How to Get Started in Apartment Investment

As one of the most lucrative investment markets, there is no better time to get in to the apartment investment sphere. Here are some tips on how to invest in an apartment the first time around.

1

Finding the Right Apartments

The first step in investing in an apartment is finding a property that ticks all the boxes. Perusing local newspapers as well as online sites are known for advertising apartment developments in areas that appeal to one's interest is the best way to locate the properties for sale. It is best to start small by looking at properties that are not owned by large developers or conglomerates as these types of apartments are secured by real estate agents and do not appreciate having to deal with potential buyers one on one. Explore properties with a maximum of 20 or so units and see if the location and the setting of the property are advantageous and offer possibilities for renting in the future.

2

Evaluating the Asset

Once a desirable apartment unit or complex has been narrowed down, it is then time to compile the financial data pertaining to the compound. One must request for the building's financial history going back several years. Current rental collection records as well as another date including vacancy rates and annual maintenance costs. An evaluation of the property must be carried out by a professional evaluator based on similar complexes in the area. As a rule of thumb, one can expect 35% to 45% of the rent is a good estimate of the income to be expected within the first year. New development such as TRI-ZEN and other properties that offer 3 bedroom apartments in Colombo Sri Lanka, for example, evaluate higher as there are fewer properties with more than two bedrooms.

3

Making Offers

Take a look at the sale numbers of other, similar properties in the neighbourhood to make an offer on the apartment. Although there are quoted price points for most units, developers are less stringent about enforcing the numbers if the property has been on the market for a while. Investors will need to make a non-refundable deposit to show the intent of purchase once an offer is made an accepted. The deposit will be returned only if the sale does not go ahead due to the fault of the developer or the owner or a case of fraud.

4

Financing Solutions

Most investors rely on outside financing methods to foot the bill for their apartment purchase as it is unusual to finance such a large investment with one's savings, for example. Once the price of the apartment has been agreed upon, it is important to start looking for lenders, whether that's in terms of banks or other financial institutions or independent lenders. It is necessary to calculate a rough estimate of how much one required to make the purchase after putting down at least 20% of the total price with one's own funds. Lending applications take time to process while investors may also need to provide proof of income and tax records to verify financial details to grant the loan.

5

Managing the Investment

After the purchase is finalized, investors have the choice of managing the apartment on their own or using a third party company to carry out certain management duties on one's behalf.

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