September 05, 2014
Apartment loan rates for properties that have five units or more are going to run about one percent higher than conventional rates on single family properties. A potential buyer will first need to determine the kind of funding that might be available. The best programs today are usually obtained from what is called agency loans – Fannie Mae, Freddie Mac, and FHA. Many institutions provide financing for real estate investors, but some offer better apartment loan rates than others. You should also check with mortgage brokers that specialize in commercial real estate financing. Shopping for the best financing deal is always a worthwhile investment of time. It may be several years before a borrowed sum is fully paid off, so getting a great deal is essential.
One crucial detail to remember is that, although some institutions offer what seem like excellent financing deals, the integrity of a lending institution is important. Some lenders make claims that seem too incredible to be possible, and that is because they are, in fact, too good to be real. Getting great financing is certainly possible, but financing that is outrageously low is likely to be accompanied by some unappealing conditions. Doing business with a reputable institution is always advisable. Mortgage brokers are also known to promise more than they deliver. Always ask for references from satisfied customers and check them out with the Better Business Bureau.
Once a prospective investor decides which lender to utilize, the next step is to select a building to buy. The best way to do this may be to hire a professional. A real estate agent will likely have access to the most appealing properties available in an area. Also have the property checked out by a licensed property inspector. Additionally, once an investor has discussed financing with a suitable entity, an appropriate price range will have been determined. A real estate agent can assist a client by recommending properties within that price range.
In some cases, investment properties must undergo some renovations, before units may be rented to tenants. This might be true of a foreclosed building, for example. The expense of refurbishing a property is generally part of such an investment. Once a building has been restored, the profit it yields may far surpass the original expectation of an investor.
An individual who wishes to invest in a residential rental building may wish to find one that can house multiple tenants. Instead of investing in a home for a single family, which can generally yield only a modest profit for an investor, a person might want to purchase a structure with multiple units. If you think about it, if you buy a 12 unit apartment complex the cost of maintenance and repairs should go down as you have 12 units sharing the expenses under virtually one roof. Just the time involved in running between 12 individual homes that you are renting is daunting. Doing this is a good way to virtually ensure a higher margin of profit and a better use of your time. Also the cost of management will be lower. Property management companies usually charge 10% to manage a single family home. Management fees for multifamily properties of 5 units or more will average between 5% and 7%. The first thing that an investor with such a goal must do is to secure the funds to invest in a residential investment property.
John Lydecker, Brand Manager, Apartment Loan Store