Buying your 1st living accommodations might simply be the most important investment you have ever created, that makes it that far more vital to own an idea before you go shopping for your new place. like the other investment, you must do your preparation, crucial what proportion you are willing to speculate and what you hope to realize from the experience.

1. How to Buy an Apartment
Complex

2. Step 1
• Decide if you want to purchase a
residential apartment complex of a
mixed-use building.
A mixed-use building has a combination of
office and residential units, but at least 80% of
the space has to be residential. The complex has
to have a grade of C+ or higher. This means you
can’t rent the units daily or weekly, and the
units can’t be single-occupancy, as in a rooming
house or motel.

3. Step 2
Ask yourself these questions before you
Consider applying for a loan:
• Is the price reasonable?
• Will I be able to finance it? Is it a profitable
enterprise? Lending institutions look at rent
income, taxes and mortgages to calculate an
accurate value of the property for financing. In the
eyes of commercial lenders, your personal financial
state is not as important as the building’s ability to
pay for itself.
• Do I have a good credit rating?
• Do I own property that I can use as collateral?
• Should I consider taking out a loan as a corporation
or Limited Liability Corporation ?
• Will I be able to manage the apartment building by
myself, or will I have to pay a property management
company to handle tenant problems or
maintenance issues that may arise?
• Should I consider a partnership?
• Is the building in good condition?
• Will I be able to increase the value of the building?

4. Step 3
Gather information about the building you
would like to buy.
• You may not be able to get a loan if the building
will require excessive maintenance, or if the
complex has not had 85% occupancy for the
three months immediately preceding your loan
application.

5. Step 4
Talk to other commercial real estate investors.
• Ask them about the pros and cons of owning an
apartment complex.

6. Step 5
Talk to local real estate agents.
• Get their advice about the location you have
in mind. Inquire about the possibilities of
future zoning changes or any public works
projects that may impact an income
producing property. If there are plans for a
regional airport to be built a few miles away
in the next few years, for example, you might
find it difficult to rent out your residential
units. Don’t assume that everything will
remain static; look at the past history of the
location and try to imagine any major
changes that could be likely to take place in
the future.

7. Step 6
Consider your end goal - the reason you want to
buy the property.
• With that in mind, figure out what your exit
strategy would be should you encounter
financial difficulty, or if you decide you no
longer want to own an apartment complex.
Three exit strategies to consider are Convert
the units to condominiums and sell them to
homeowners.
• Take advantage of the 1031 Exchange. Under
U. S. law, you can exchange your real estate
asset tax free instead of paying the capital
gains tax when you sell the building.
• Refinance the property. Use the equity you
have acquired to buy another piece of
commercial real estate.

8. Step 7
Have the building inspected by a
professional who has experience
inspecting commercial buildings.
• Make sure the inspection covers every aspect;
don’t settle for a standard inspection, which
may not include trouble spots, such as a wet
basement. Pay extra money if you have to for a
thorough inspection that goes above and
beyond what is required by mortgage lenders. If
the inspection reveals serious flaws, don’t make
an offer, or reduce your offer amount by the
amount it would cost to make the necessary
repairs.

9. Step 8
Assemble the documents you will need for the
loan application.
• Your real estate agent will be able to assist
you in this. Most lenders require the
following documents, but your lending
institution may require more Your personal
financial statement
• Documentation of the property’s current
rental income.
• The building’s operating income statements
or Schedule Es for the past two years.
• The building’s year-to-date operating income
statement.
• The monthly breakdown of income for the
building for the previous 12 months.
• Current photographs of the building.

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