Top 5 Things to Consider When Investing in an Apartment Community

May 5, 2016
When to Buy an Apartment Community

Making the decision to purchase an apartment community can be both nerve-wracking and exciting. Unlike purchasing other types of property, you want to be sure that your potential investment has the ability to generate a profitable return on investment. What may seem to be a great fixer-upper could turn out to be an insurance liability. Likewise, an upscale apartment community may be outside of your budget and require extensive costs in maintenance.

Your new investment, if done correctly, can serve to be a great source of income for you and a source of happiness for potential renters.

Here are the top five things to consider before investing in an apartment community.

Consider the property’s income potential. This extends beyond the property itself and also includes examining the surrounding neighborhood as well. Is the property in a high crime area, or located far away from local attractions or public transit? If you answered “yes” to either of these questions, then you may have to reduce your monthly rental fees to attract potential renters. This in turn could eat into your long-term earning potential. Take the time to do your research and look into both the value and appeal of the property as well as any other factors that could influence (positively or negatively) your long term revenues. Gathering average annual costs of ownership estimates from former property owners can also give you valuable insight into the maintenance and repair costs associated with the property.

Determine the current state of the building(s). How old are the buildings? Have they been upgraded recently? Are the buildings and any other structures up to code? These are critical questions to ask when making the decision to purchase an apartment community. Buyer beware: as the owner of a multi-family residential property you are responsible for repairing damaged buildings using the latest codes and complying with local ordinances. For example, if the previous owners did not update electrical wiring, plumbing, or other key infrastructure, and the building is damaged in any way, you will be responsible for repairing the building and may incur additional costs related to getting the new structures up to code. Taking the time to verify that apartment structures are up-to-date and compliant with property standards can save you big in the long run.

Purchase the property under a company name. Commercial real estate experts recommend not to purchase a multifamily property in your own name. This is to protect yourself and your assets in case of a law suit. If you purchase your property in your own name, you set yourself up for creditors being able to seize your personal assets should you get behind on payments.[1]

Identify any existing liabilities. Are there glaring issues with the property that would make it difficult to get insurance? This could include fire code violations, ill-maintained swimming pools, or damaged stairwells or exits. If there are large and costly structural issues that would need to be repaired before you could apply for residential licenses or secure an insurance policy, then it may be best to look elsewhere to invest. Remember, if you think it is a liability or may cause injury to your residents, then an insurance company will likely agree.

Calculate the potential insurance costs. Insurance premiums could be in the thousands of dollars per year for even a small multi-family property. Considering the potential insurance costs can be key in making your investment decision. At, Top Floor Insurance, apartment community insurance is all we do and our insurance specialists would be happy to provide a preliminary price quote to help you determine the estimated insurance premiums for a potential property. Our insurance quote process is very easy and a detailed price indication can be generated within 24 hours. To learn more about our no obligation insurance quotes, click here.

Becoming an apartment community owner can be very rewarding. To avoid costly surprises from creeping up on you, take the time early to investigate, gather information, and make informed decisions. Visit our online resource library, here, to access complimentary videos and articles to help you determine if purchasing an apartment community is the right decision for you.