Apartments offer an excellent entry point into the real estate market if you are looking to buy your first buy-to-let and put your first notch on an investment portfolio. However, given the nature of apartments, there are a few things first timers need to consider for taking the plunge and opening the purse strings. In today’s guide, we’re going to go through some of the basics of buying an apartment, from what to look for through to selling it on for a profit.
Before you even start to look around for the right apartment block, you will need to consider the location. Apartments in the main cities tend to have higher capital growth than those out in the countryside, although if the rural area has been targeted for regeneration in the future – or is known as an up and coming area – the long-term prospects of the apartment could be even higher. Keep an eye out for your local government’s plans and also seek out realtor new launch events. Both will keep you up to date with the areas that are being targeted for building work and could be worth an investment if you want a high return in the long term.
Consider your ideal tenant
It’s important to have a think about your ideal tenant, too. What sort of person do you want to rent your property out to? Families are often good for long-term tenancies, but you might be able to squeeze more rent out of an apartment full of students. That said, the location of your apartment will determine the sort of tenant you will attract. Parents, for example, like to be near good facilities such as local grocery stores, play areas for the kids, and, most importantly, good schools. Students, on the other hand, prefer to be in bustling centers – preferably near their college – surrounded by an exciting nightlife. There’s the young professional market to consider, too, although you have to bear in mind that appealing to this type of tenant also has its drawbacks. Young professionals often move on quickly and tend not to settle long in the same place.
Offer something unique
One of the sticking points with apartment investments is that they are often in large complexes with hundreds of other apartments that are very similar. If possible, look for a something with a more boutique feel – perhaps with a maximum of twenty or so apartments in the complex. That said, the larger complexes and condominiums can have their advantages and selling points. These days, for example, you might find that an apartment in a large block has its own private gym or swimming pool – perhaps even a rooftop garden – for tenants and residents to enjoy. Either way, a unique apartment or offering will help your investment stand out from the crowd – and could help you attract a steady flow of tenants.
Look up, not down
Apartments on higher floors tend to be more appealing to tenants than those on a ground floor or basement. There are a few reasons why, which we’ll go into right now. First of all, apartments on higher floors tend to allow more sun through the windows, while those on ground floors and basements suffer from a lack of natural light. Secondly, there is a security concerns or tenants on lower levels, as these types of apartments are easier for burglars and thieves to access. You will often find that those rooms on lower levels tend to have cheaper rents than those higher up – so you will need to factor in this price differentiation before setting your rates.
Set the right rates
On the subject of rental prices, it’s important to understand how much your tenants are likely to pay. You will need to factor in paying for your home loan, repair work, maintenance charges, and a lot more besides. There could be a maintenance payment to the complex leaseholders to make each month, for example. But you will also be limited with what you can charge – there isn’t much variation in apartment rental rates in the same area unless you are investing in the luxury or penthouse-style apartments. It’s important to do a healthy amount of research before you buy to ensure that the area commands the right level of rent to make your investment worthwhile.
Look for extras
If you want to squeeze a little more out of your tenants, there are a few things that can make a difference. Supplying a furnished apartment, for example, can give you a little more leeway, but the downside of this is that most people looking to rent a place will be looking for an unfurnished property. We’ve mentioned apartment block services such as swimming pool or gym, which can be appealing for any tenant. But another thing to factor in is a parking space – apartments with parking spots tend to command much higher rents than those without.
Finding good value in the apartment market can be a little tougher than buying a standard house. But there are a few things to look out for. First of all, if you are a cash buyer, you will find it will often be enough to get you a significant discount. Complex builders often offer special deals for early purchasers, too, so keep a close eye on your local market and find out where has been earmarked for development. Finally, consider finding an older apartment in an area targeted for renovation by city chiefs. You will often find that once a zone becomes more popular and wealthy people start moving in, you can command higher rents – although there is, of course, a little risk involved with this type of strategy and certainly no guarantees.
Wherever possible, restore your property so that it is appealing to as many tenants as possible. A clean bathroom and new kitchen are probably the first things a prospective tenant will look at when they view your apartment, and if the living spaces look fresh and new, you will be more likely to avoid an empty property and maximize your rent potential. It’s worth getting a local valuer in to help you with the renovation, however. For every dollar you spend on making improvements, you want to get a buck more back as a general rule. But there is a danger of spending way too much on decor, fixtures, and fittings that your local rental rates won’t cover. Don’t forget, there will be a maximum level you can charge, no matter how beautiful or attractive your apartment is.
Selling the apartment
So, the final question when is the best time to sell your apartment? The reality is that if your apartment is giving you a good rental income, you should keep hold of it for as long as possible in the vast majority of cases. Seeing your apartments as a ten or twenty-year investment will almost always give you an excellent return. That said, it’s always wise to keep your eyes out for local market fluctuations, and be wary of general real estate prices falling in your area.
There is a lot of legwork involved in buying an excellent apartment and becoming a landlord. But if you take a long-term approach you will find there is a lot of potentials for your investment to grow, and you will also receive a nice little income as an addition. If you can put some of those profits to one side, it won’t be long before you have the money to go to another apartment – which is a fantastic position to be in. Good luck!