Without a doubt, I believe investing in apartment buildings is one of the best vehicles for wealth creation — when done right. And to do it right, you need to know what to look for in an apartment complex and how to maximize the opportunities in the marketplace.
Recently, I wrote an article on my go-to multifamily investing checklist to help get you educated on the subject. Granted, it only covered the broad strokes.
You know what they say…
The devil is in the details.
So, I wanted to go over the specs on the perfect apartment complex in my eyes.
In an ideal world, mine would check off all the following boxes.
In 2022, THIS Is What My Dream Apartment Complex Looks Like…
Let me preface this list with a little word about investing in apartment buildings. The key to your efforts paying off is to prepare for the worst-case scenario.
Underwrite every deal as if there is going to be zero rent increase. If the numbers don’t make sense in this situation, don’t do it.
Furthermore, before I ever attempted my first deal, I intensely researched the market that caught my attention. I walked countless properties. Then, I underwrote every deal that I was interested in… multiple times.
EVEN TODAY, I WILL LOOK AT ONE HUNDRED DEALS TO BUY THREE OR FOUR.
In short, I do my homework.
Prior to pursuing any real estate investment, you absolutely have to make sure you got all the data plugged in. That includes who can be brokers, accountants, possible lenders, etc.
Nonetheless, I personally include these points in my current due diligence…
Minimum 100 Units
In my bestselling book, “How to Create Wealth Investing in Real Estate”, I say the minimum number of units for a deal is sixteen.
Despite that, I’m talking about what I think is the absolute best apartment building to invest in.
So, as I see things for me today, the dream deal would have one hundred units or more.
This is just an expansion of my principle that the number of units is the most important number in real estate.
I have elaborated on this idea that buying larger deals can be less risky many times. But to simplify this, the more units, the smaller the losses when tenants move out.
To further illustrate this point, the smallest deal I have working right now is 104 units in Stuart, Florida. At the same time, I have one with 583 which is also in the sunshine state. Both fit this perfect deal* criteria.
Nonetheless, if ten tenants move out of the first property in Stuart, I am down 10% of my occupancy. On the other hand, if ten people move out of the 583 unit complex, that is only a 1.7% drop in occupancy!
Do you see what I’m saying?
In apartment complex investing, bigger is always better.
Gorgeous Property
Next, I’m sure you know how important it is for your assets to be in safe neighborhoods with terrific schools and easy access to shopping and entertainment…
But what about the condition of the property itself?
You can invest in the hottest market in the world. But if the apartment complex is worse for wear, your investment won’t be as profitable as it should be.
Inexperienced investors sometimes fall into this trap in “rehabilitated” areas which used to be degraded. They buy low-quality deals at a low price and spend more money than anticipated on upgrading the property.
With this in mind, when I shop for real estate, I look for impeccable apartment buildings with amazing amenities.
Here are some property perks that get my attention:
- Full-service gyms on the premises
- Lagoon-like pool areas
- Valet parking
- Concierge services
Benefits like these coupled with aesthetically pleasing landscaping and units are a killer combo.
Still, there is another ingredient to add to this mix which can make you lethal in the real estate game…
High-Growth Market
Different from the neighborhood the apartment complex is in per se, you should pursue assets in rapidly developing markets.
This is where you’ll find the cream of the crop in apartment complex investing.
But what specifically does that mean?
There is no shortage of opinions and technical data on this subject… but it all boils down to three main points:
- Migration of people to the area
- Temperate weather
- Places with lower taxes
To paint a clear picture of what a high-growth market will look like, I’ll give you some examples of hot spots I’ve bought apartment buildings in.
Check out the stats on the real estate market in Georgia, for example. Currently, huge tech companies have made or are making plans to move to its capital, Atlanta.
MORE JOB OPPORTUNITIES EQUALS PEOPLE RUSHING INTO THE AREA.
Pair this up with the fact that the American South has great weather, and Georgia starts looking pretty good for investing.
Second, everything’s bigger in Texas — including real estate opportunities. As the larger cities like Houston are being developed and trendier, young business professionals are moving in.
This creates the ideal circumstances for the Texas market to keep growing.
The last place I want us to examine together is Florida. Man, Florida is a sweet market. It’s so good that I even moved my family and businesses here.
It has the holy trinity for a high-growth market with its constant flow of new people, fantastic climate, and low tax rates.
You see, nothing in this universe is stagnant. You are either growing or contracting.
The same is true about real estate markets.
Don’t get stuck and contract.
But if you really want to feel like your apartment complex is easy money, the next tip makes all the difference…
Top-Tier Property Manager
I know a lot of people will fight me on this one. Regardless, the perfect apartment complex is going to have a world-class property manager.
Trust me, you don’t want to save a few dollars by managing the property yourself. Unless, of course, getting midnight phone calls about leaky faucets is your thing.
Also, make sure you pay whoever you hire well. If you don’t, they will either steal from you in cash or by slacking on the job. Either way, it will affect your asset.
Here’s what the complete package would look like…
The property manager would be knowledgeable about real estate from both the renter and investor viewpoints. Because of this, they could be organized and detail-oriented in how they run the property.
Additionally, she or he would be professional, a GREAT communicator, and a specialist who responds quickly.
I assure you an individual with all these qualities managing your apartment complex is worth the money.
And the Single Most Important Quality an Apartment Complex Must Have for Me Is…
COC. Cash on Cash. Cash flow, baby.
Look, nothing I said above is worth a damn if your property doesn’t have cash flow.
This one thing is the hard line between winners and losers in real estate.
NO CALCULATION IS MORE IMPORTANT THAN CASH FLOW — NONE!
Cash flow is what pays for the incredible property manager we just talked about. It pays for property improvements and repairs. It pays your investors…
And most importantly, cash flow is what pays YOU.
To figure out what the cash flow will be on a rental property you calculate, you take the total income minus the total expenses.
Don’t leave anything out while doing this math! I have a whole list of expenses (and collected income) to make sure you include here.
I prioritize this criteria above all else — and so do lenders and investors.
And at the end of the day, that’s what finding the perfect apartment complex to invest in is all about…
Getting everyone paid and on the road to financial freedom.
Hope this article helps you get yours.
Be Great,
Grant Cardone
* This is Grant Cardone’s opinion on what he sees as a “Perfect Deal.”
Disclosure: This content is intended to be used for educational and informational purposes only. Before investing, you should always do your own analysis based on your own financial and personal circumstances before making any investment. Grant Cardone is an industry expert who has been investing for over 30 years and his opinion is based solely on his own personal experience and circumstances. Individual results may vary. You should perform your own due diligence and seek the advice from a professional to verify any information on our website or materials that you are relying upon if you choose to make an investment. Investment involves great risk and there is no guarantee of performance or results.
We are not attorneys, investment advisers, accountants, tax professionals or financial advisers and any of the content presented should not be taken as professional advice. We recommend seeking the advice of financial professional before you invest, and we accept no liability whatsoever for any loss or damage you may incur.
Today, while I was at work, my sister stole my iphone and tested to see if it can survive a twenty five foot drop, just so she can be a youtube sensation. My apple ipad is now destroyed and she has 83 views. I know this is totally off topic but I had to share it with someone!