Properties that provide housing for five or more families are considered to be apartment buildings or complexes, whereas units with up to four dwellings are excluded from this category. Loans that are underwritten for such properties are a little more complicated, but are still as accessible as loans for smaller buildings. Here are some ways you can go about financing your purchase of an apartment building.
Steps for buying an apartment building
If you haven’t purchased an apartment building before, you might be a bit overwhelmed by the process. However, if you follow the guidelines described below, you should be able to successfully conclude the transaction, and start reaping the benefits of owning the building.
- Establish goals – decide what you’re trying to accomplish by purchasing an apartment building, and work out the profitability after expenses
- Set a budget – this involves not only the purchase price, but make sure you also know how much money will be needed for repairs and maintenance
- Work out the cash flow – you’ll need to calculate exactly what level of cash flow you’ll have in operation, so you know if it will be profitable
- Get pre-approved financing – once you’ve decided where your apartment building will be located, you should get pre-approved for financing, so that doesn’t become a holdup later
- Research properties – find a local property you’re interested in or find several, and then make offers on these properties
- Building inspection – get the building inspected so you know exactly what you’re dealing with
- Setup management – if you don’t intend to manage the property yourself, find a good property manager you can work with
- Secure financing – show the terms of your deal to the pre-approved lender, and close the deal
- Keep looking – now that you’ve been successful on your first purchase, you can start looking for other advantageous opportunities.
Looking to finance an apartment building purchase?
It takes some solid financial support to purchase an apartment building, but the rewards can be substantial if you can pull it off. We may be able to provide financial assistance in your venture, so contact us at GM Capital Group if you’d like our specialists to work with you on this kind of business transaction.