Posted by carlojoh190rnej in Investment

1 – Location Matters. You may have what looks like a great property, but the area it’s in can bring it down quickly.  Many real estate investors fail to take this into account and buy properties in war zones never to recover.  But it’s not just the war zones that will hurt you. It’s good to make sure there’s a reason for people to “want” to live in that part of town.  What’s around it?  What jobs?  What’s the trend?  The best way to research this to drive it yourself and then research it with the resources available on sites like your local chamber of commerce.  Talk to brokers, see what they think.  Location matters.
2 – Operating Expenses will always be Underestimated.

This is where it pays to have a good network of other professionals to help you double check the numbers. Often a good property manager can do this for you.

Get original copies of all the utility expenses for the past year and then be very very conservative with all the numbers. You’d much rather be conservative than aggressive here.

3 – NEW Property Tax Assessments -

Be certain you know when the county reassesses your property taxes because these can blindside investors and cause a big chunk of cash “out” flow.
4– All Bills Paid/Master Metered?  Beware!

These types of apartment buildings have one master utility meter for electric and gas and water.  You’re going to want the units to be individually metered instead.  It will save you a lot of money.  However, in some cases, depending where you are in the city, the norm may be all bills paid…you may not be able to switch without hurting your competitive edge.
5 – SALES COMPS?

This is a rapidly changing market, make certain sales that data is no more than 6 months old.

6 – Proformas aren’t worth the paper they’re printed on…

You must do your own analysis here.  You get the actual 12 month operating statement, rent roll and even call the apartment complex yourself, posing as a tenant and ask for the rental rates.  Do the same with your competitors too.  These numbers can make or break you…you must have the real figures.