I recently had an in-depth conversation with a client who had stars in his eyes over the idea of buying an apartment complex. He had done some research and was convinced that the “per door” cost made it a great opportunity that was simply too good to pass up. But after our conversation, I convinced him that there were far better ways to invest his money.
The reality is that owning an apartment complex, particularly in a downward trending market, can be a complete nightmare. And yet, there are plenty of investors out there who are still chasing these deals, lured in by the idea of stable cash flow and predictable returns. So, let’s talk about why this might not be the best idea, shall we?
First of all, let’s be clear: buying an apartment complex is not the same as buying a single-family rental property. Sure, the math may look similar on paper – you buy the property, you rent it out, you collect rent – but the reality is that the stakes are much higher when you’re dealing with dozens, or even hundreds, of units.
When you’re a landlord for a single-family home, you have a lot of control over the property. You can manage the tenants, you can make decisions about repairs and improvements, and you can keep a close eye on your cash flow. But when you’re dealing with an apartment complex, all of that control goes out the window.
Instead, you’re essentially running a small business – one that requires a huge amount of time, effort, and expertise to manage effectively. You need to handle all the same responsibilities as a landlord of a single-family home, but you’re doing it on a much larger scale. That means you need to be an expert in everything from maintenance and repairs to tenant relations and marketing.
And let’s not forget about the additional regulatory burdens that come with owning an apartment complex. Depending on where you live, you may be subject to a wide range of laws and regulations, covering everything from tenant screening to eviction procedures. If you’re not careful, one misstep could land you in legal hot water.
So, given all of these challenges, why are so many investors still chasing apartment complex deals? Well, in a hot market, they can be a great source of steady cash flow. The idea is simple: buy the property, raise the rent, and watch the profits roll in.
But the problem with this approach is that it assumes the market will always be hot. It assumes that rents will continue to rise, that vacancies will remain low, and that tenants will always be willing to pay higher prices. And as we’ve seen in recent years, that’s simply not a safe assumption to make.
When the market takes a downturn, apartment complexes are often hit especially hard. Suddenly, tenants can’t afford the higher rents, and vacancies start to climb. And when vacancies start to climb, landlords are forced to offer incentives – like free rent or waived application fees – just to get people in the door. All of this eats into your cash flow, and if you’re not careful, you could find yourself in a dire financial situation.
So, if you’re thinking about investing in real estate, my advice would be to steer clear of apartment complexes, at least for now. There are plenty of other options out there – from single-family rentals to commercial properties – that can offer great returns without the headaches and risks of apartment complex ownership.
In short, the idea that you can’t go wrong with apartment complexes is a myth. It’s time to start thinking outside the box and exploring other opportunities. Trust me, your bank account will thank you in the long run.