There are different types of real estate investments for income generating property. These are mostly commercial, but can also be residential. Unless of course, we have a small percentage of home owners with a large amount of residents needing to rent the property they live in. With property there are differences in land and building sizes with larger land and buildings sizes requiring higher investment amounts. For residential investment properties normally the largest are apartment buildings and property. These also use the most rental space per land size.
As long as apartments have been purchased at a price with positive cash flow where rental revenue is greater than total expenses, for example mortgage payments on a loan used for purchase, taxes, utilities, insurance, repair and maintenance, management fees, etc. Then a positive profit making cash flow should result. This may be small at the start of new ownership, however as time passes it could increase due to increase in rental prices. I would hope that rental prices would increase due to an improvement in property through additional construction or because of an improved more desirable neighborhood. However, prices could also increase due to the inflation of market rental prices.
One apartment building is less difficult to manage and maintain than several single-family homes. Time alone in transit going from one property to another should indicate this. Also with building maintenance for example, the cost per square foot would be less when a contractor does roof repair for one apartment with five tenants than five separate units and tenants at different addresses with five different roofs. Also with an apartment building, a hired property manager could be an option.
An apartment building allows you to charge for additional services with increased revenue, for example the following:
- Coin operated laundry machines with an onsite laundry room (can save the time and expense of tenants driving to a laundry business.)
- Appliance rentals for things residents use such as vacuums and carpet cleaners that you can earn income from while encouraging residents to keep their units clean.
- Additional rental storage units for the tenants to keep their possessions.
- Additional parking for reserved spot or covered parking with a monthly cost.
With an apartment building management and maintenance is required as the needs of the tenants will have to be dealt with. The specifics of the responsibility of maintenance between property owner and tenant needs to be part of the lease agreement. If you manage the property yourself, this can lower costs, but will require work. You will have to do bookkeeping, fill vacancies, and keep your property clean and maintained, while sometimes working with employed people. However, with larger apartments or if you plan on being primarily a capital investor, taking on the tasks of property management may not be in your best interests. This is especially true if your owned apartment is not near your location. Thus hiring a property manager may be in your best interests so that you can focus on acquiring additional properties that will build more wealth for a financially secure future.