Investing in a Charlotte apartment complex can be an excellent opportunity, especially if the building is in good condition, a desirable location, and its occupancy rates are high.
You can use some help from local experts, even if you’ve done this before. Charlotte property managers can be especially helpful; advising you on how much you’ll be able to charge in rent right now, what you’ll have to spend on maintenance and renovations, and what kind of tenants you can expect to attract to a building you’re considering.
Let’s investigate what you should be looking for when you decide to buy a Charlotte apartment complex.
Choose a Size that Fits your Investment Goals
How much money do you have, and what are your short and long term investment goals? These are the questions that will drive the size of the building you purchase. A lot of major investment firms will tell you that the larger the building, the bigger the payout. This may be true, but as a private investor, you may be better off with a mid-size building. If you’re new to investing, there’s nothing wrong with starting small. A four-unit complex that’s well-managed and consistently occupied can help you earn some real income and establish yourself as a serious investor with assets to leverage.
Unless you’re willing to consider a multi-million-dollar deal or you’re investing with a number of well-funded investors, we recommend that you choose an apartment building that’s affordable for your budget and easily controlled. With 12 units, you can spend some time analyzing the rent rolls and understanding the motivating factors behind tenant retention. In a building with 150 units, you’ll spend a lot more time analyzing the relevant data, and you’ll need a lot more money.
Look for a building with fewer than 100 units. This requires less equity during the purchase process, it provides great cash on cash return, and you’ll find that there is generally more inventory in the Charlotte real estate market for mid-sized complexes and buildings. Think about your capacity for maintenance, tenant relations, and property management, too. Taking care of 50 units is a lot different than taking care of 200.
Consider Apartment Building Location
Charlotte is a large city, and it seems to be spreading. You can find an apartment building uptown or in a suburb. Where do you want to invest? This is an important part of your decision because it will impact what you spend, what you earn in rent, and what types of tenants you attract to your units.
The importance of location does not apply only to single-family residential homes. Tenants choosing an apartment are just as particular about their neighborhood and location. So, when you’re buying an apartment complex, be aware of where it’s located. You’ll need to consider whether its location is an asset when it comes to attracting good tenants, or a detriment.
Gather economic data about the neighborhood. Look into crime statistics and safety. Find out how long tenants generally stay in the area and whether it’s all residential rentals or whether there are some owner/occupant households in the neighborhood. Is it walkable? Are highways and commuter routes nearby? What about schools? Schools will always be important when you’re investing in any kind of real estate.
You’ll want to think about how much your apartment complex will increase in value over time as well. Location will impact appreciation.
Charlotte Apartment Complexes with Value-Add Opportunities
A wise investment is one that will allow you to earn money with more than one income stream. Obviously, you’ll collect rent from your tenants. That will make up the bulk of your earnings.
Buildings with a communal laundry space, however, will allow you to earn some extra income on the money you charge for the laundry facilities. If you provide parking in a garage or a lot and there’s not a lot of free parking in the neighborhood to be found, that could be another income stream. Maybe you’ll offer valet trash collection right from your tenant’s front door. That could be an extra monthly charge.
When you’re looking for the right investment, know where you’ll make your money. Rent has to be consistent and recurring. If you can earn money on top of rent, you’re in an even stronger position.
Apartment Complex Due Diligence Before You Buy
As with any investment, you want to do a little research and a lot of legwork before you make an offer on an apartment building. Here’s what to check:
- Rent rolls. The rent roll provided to you before you buy will tell you how much money is earned every month from the tenants who live in the apartment building. Do some digging. You want to know what those numbers really represent. Are there tenants who consistently pay late? How are late fees collected, and how much are they?
- As a few additional questions about the data you’re given that covers existing tenants. How many vacancies are currently open at the apartment? How many leases are coming up for renewal in the next few months? What kind of turnover is common?
- Analyze the T12 statement. This will tell you what the income and expenses were for the apartment complex over the last 12 months. It’s a quick and easy snapshot that can give you an overview of whether there’s comfortable cash flow or a potential problem.
- Have a professional inspection. You’ll need to know that the building is sound, and that the complex is in good condition. You don’t have to have every unit inspected, but getting a good sampling is standard. In a 20-unit complex, for example, you might want to have four units checked by a professional inspector.
Don’t forget to gather a network of professional partners to help you in your search for an apartment complex investment. You’ll want to work with real estate agents and brokers who specialize in multifamily residential properties. You’ll need a Charlotte property manager who can help you evaluate the data you collect on rent, tenants, and location.
We can help you in your search for a profitable apartment complex. Please contact us at AM Realty, and we’ll talk about your investment goals and the Charlotte properties that match them.
