Getting started as a commercial real estate owner or investor is an excellent way to diversify your income and improve your wealth in the long-run. There are many different ways to get started in the industry, but one of the easiest and most lucrative options is to invest in apartment complex ownership. By investing in an apartment building, you’re helping solve the housing crisis by providing quality homes to residents in your area. However, before you make the investment, you need to know what to expect. Here are a few of the common pros and cons of apartment complex ownership you can expect to see once you buy-in.
Steady Cash Flow
Most tenants lease their apartments for a set period. Once they sign their lease agreement, those tenants are responsible for paying rent on time every month until the lease expires and they leave the property. Once you rent out the units, you’ll have a steady flow of money coming in each month from every active tenant.
Increased Equity Over Time
Though it’s normal to finance your real estate investment, you’ll start to build equity the longer you own the property. This happens as you pay down the loan. The more you pay down, the more equity you have and the more money you’re able to keep should you sell the property in the future.
Additional Liability Concerns
When you own the apartment complex, you’re responsible for everything that happens on your property. If a tenant gets injured on your property as a result of a lack of maintenance or one of your repairs causes damage to your tenant’s property, you’ll be responsible for the full cost of the damages. Investing in a comprehensive OH habitational insurance policy will help cover those expenses. Keep in mind that you’ll still want to be responsible and maintain the property to the best of your ability.
Ongoing Maintenance Responsibilities
Maintenance is an ongoing problem in any apartment complex. As the owner, you’re responsible for keeping each unit in a livable condition and must keep all common areas in safe working order. If you don’t, tenants can sue or break their lease without legal repercussions, costing you valuable income each month.
Lost Income on Vacant Units
No apartment owner can guarantee that they’ll fill each unit every year without issue. You’re going to have empty units at some point, and every empty unit means you’re losing income. A habitational risk insurance policy won’t be enough to hedge against that lost income. You’ll need to implement an aggressive marketing strategy to lease each unit before it becomes vacant. Make sure you have a plan in place to market each unit and attract prospective tenants quickly to reduce the risk of lost income.
Once you’re aware of apartment complex ownership pros and cons, you’re ready to decide if investing in a property is in your best interest. As long as you take the time to acquire comprehensive insurance coverage and do right by your tenants, you’ll see more of the benefits than the downsides. Just take care to put your tenants first every time you fill a unit.
About Haughn & Associates
Haughn Associates Founded by Michael Haughn in 1986, Haughn Associates is a full-service, family-owned, independent insurance agency based out of Dublin, Ohio. HA strives to provide the best possible price and unique insurance solutions across a myriad of industries, including construction, IT, Habitation Commercial Property, Agriculture, and Engineering. Devoted to providing the best of business insurance, life and disability insurance, personal insurance, employee benefits, and bonds, HA is proof that success lies in long-standing client relations and satisfaction. To learn more about how HA can be of service to you, contact us at (877) 802-2278.
