The In’s and Out’s of Building vs. Buying Apartment Buildings
Investing in apartment buildings is one of the most time-tested, lucrative ways to build wealth. Multi family apartments in Ohio have a remarkable array of benefits, including stable cash flows and easy financing. If you want to invest in a multi-family property, you’ll need to decide whether to build or to buy the apartment building.
This article will evaluate the ins and outs of building vs. buying apartment buildings to help you make a more informed decision.
The Ins And Outs Of Buying Apartment Buildings
When buying an existing multi family property, you’ll need to evaluate the building’s condition thoroughly. It’s crucial to ensure that there are no major defects and that you’re not investing your money in a management headache.
You need an engineer or contractor to conduct a detailed inspection of the structure, foundation, and general building condition. Be sure to evaluate the plumbing, electrical, roof, and any prior repairs done to the property.
The Pros Of Buying Apartment Buildings
Many people within the real estate investment community will advocate for buying and then renovating to add value to an existing multi family apartment, over constructing a new complex.
This view makes sense to some investors. Some believe that buying and upgrading existing properties will avoid any obstacles caused by new construction, such as planning, obtaining permits, design, and any other headaches that come with investing in new construction.
Typically, here are some of the benefits of buying an apartment building:
Potential Bargaining Power – With an existing apartment, you might leverage data to get a better price. For instance, if the property has been on the market for over 30 days, the seller might be willing to lower the price accordingly. In addition, if a similar apartment property in the area is priced lower, you can use that to leverage a lower offer.
Convenience – After you buy and close an apartment, tenants can almost move in immediately. The sooner people live in your apartment building, the sooner you can start making your money.
When you build an apartment building from scratch, there is a lot of down time. Building an apartment complex takes time. As an owner and investor, not only do you have to wait for the apartment to be built, but all the amenities and utilities have to be up and running. It takes time to get the ball rolling and move people in. You have to be 100% sure your apartment is ready to accommodate all of your tenants.
The Cons Of Buying Apartment Buildings
Buying a multi family building means you’ll get ready-to-move-in homes. Although you can make some improvements here and there, you’ll most likely not check every item off on your list of wants and may have to compromise.
Not getting exactly the design you want and compromising on other aspects of an apartment building is the downfall of buying an apartment building. Here are a few others:
Potential Market Competition- 2021 is a hot seller’s market, and hence many apartment buildings for sale in Ohio have stiff market competition.
Stiff competition may drive the prices up, leaving you paying more than you should.
Older Internal Systems And Appliances- The apartment might have appliances, pipes, and electrical systems that are not energy-efficient and worn out.
An outdated apartment may call for you to make expensive updates in the future to keep your tenants satisfied, which means more money coming out of your wallet.
Costly Repair-An existing property has technically been lived in and used. Some people just don’t take care of their belongings and completely trash apartments. You are left cleaning it up and putting the pieces back together in order for you to make a profit.
When buying an apartment building, you may need to undergo renovations for the property to attract people. It’s worth noting, the insurance rates will likely be higher on an older apartment than what you’d pay for a new apartment.
When Building New Makes Sense
When looking to build a multi family apartment, the process and analysis is entirely different from buying an apartment.
You’ll first need land to build on. Your build will have to get approved, and then the search for a contractor begins to plan and construct the building from scratch.
When building your own apartment complex, you don’t have to worry about restrictive infrastructure, out-of-date styles, old wiring, or other potential defects. You can also choose the exact location of the structure within your lot and the amenities to incorporate.
The Pros Of Building Apartment Buildings
Building an apartment complex can be an adventure. That means you should expect a fair share of ups and downs, but at the end of it all, you’ll be glad you went the extra mile. Here are the advantages of building new.
Full Control Of The Building Process- The biggest benefit of building an apartment complex is that you’ll get exactly what you envisioned, as long as it’s within your budget. Make a note, it is imperative that you stick to the budget you created. Deviating from the budget is one of the biggest mistakes beginners make in the industry.
New apartment building construction allows you to personalize the details, including the architectural design layout, features, flooring, lighting, and painting to meet your needs and taste.
Lower Maintenance Cost- Since you are building a brand new apartment building, the repairs and issues will be at a minimum for the first years.
The new apartment building will be up to date on all the latest amenities and appliances, there should be no worries there in the near future. Plus, many apartment builders offer a warranty that covers breakage.
Saves You Money in the Long Run – Building a new property might seem expensive. The actual cost, in the long run, can save you money since the new property doesn’t require costly renovations and legal fees.
Lower Energy Costs- Typically, new apartments will feature up-to-date energy-efficient materials and systems, and that can result in lower energy bills.
The Cons Of Building Apartment Buildings
When investing in apartment building construction, you need to ensure you’re doing it the right way. You do not want any regrets in the future.
Building is a huge and tricky venture. It’s up to you to find a reputable architect or engineer, carry out in-depth research, and then finally build a completely new structure. Here are several drawbacks you’re likely to experience if you choose to go down this route:
Longer Wait Time- It takes several months to construct a new apartment building. Not to mention, it does take a while to plan before ground has even broken on the construction site. It is also possible that there may be delays and complications in these stages.
Hard To Negotiate Price- While it’s common to lower the offer in the resale market, a new apartment building is different. Depending on the market and the state of the property, you may be able to upsell the cost, so you can make a profit off the sale. Typically, there isn’t leeway on closing costs or builder’s expenses.
Buying vs. Building Apartment Buildings: What’s Right for You?
While you have two options, ultimately, building a multifamily apartment is an excellent choice, especially if you have land to build on. Building not only brings newness but will help you avoid management issues down the line.
A new property enables you to incorporate modern designs, and that means you can ask for top dollar rent, and the property will continue to increase in value as days go by.
Keep Up To Date With The Construction Industry
Subscribe to our news to read current stories, learn about trends, and discover tips about the residential construction industry.