For a great many years towards the latter part of the last century, real estate investors had a love affair with previously owned, single family dwellings. These were ‘fixer uppers’ that were bought for a low price, renovated and flipped for a quick sale. The profit margin varied greatly, but was usually great enough to buy another like-priced property as well as a second one. The process was repeated but now on two homes instead of one, and so it continued.
However, when the bottom fell out of the market in 2009, many such investors lost their proverbial shirts. They had reached a point where all their money was sunk into several properties that no one had money to buy and financial institutions were refusing mortgages. This leads to the best answer to that question. Which is better, apartment building investments or buying single family dwellings? The simple answer to that question is, apartment building investments. Now, here’s why.
The Demand for Single Family Homes Just Isn’t There
When the market bottomed out, it wasn’t only investors that lost everything. Unemployment skyrocketed as a result of a poor economy. To this date, more than half a decade later, the market still hasn’t fully recovered. Many people who would, under favorable market conditions, be buying a house still don’t have adequate income and lenders are still tight with the money. Even buying homes to renovate for a quick sale aren’t moving as fast as they once did and still mortgages are hard to qualify for. Banks are no longer handing them out like candy as they had in the ‘80’s, ‘90’s and even into the 2,000’s.
Apartment Building Investments Make More Sense
Now then, here is why apartment building investments make more sense, according to realty market experts and financial advisors Crawford Park Financial. Since the cost of single family dwellings is on its way upward and banks are still tight with their money, people just are not qualifying for mortgages like they had been. If they manage to come up with a down payment sizeable enough to have any hope of getting a mortgage, their monthly payments would be just too high to handle.
This has driven greater numbers of people to seek rentals. But here you have the Catch 22. There are only so many single family dwellings available to rent and those rentals are priced extremely high. If you only have enough money to buy one or two such dwellings, what happens when they can’t pay their rent? That’s right! You lose your income and are then unable to pay your mortgage. Yet in a multi-family apartment building, if two or three apartments don’t pay timely, at least the remainder will provide enough income to keep the mortgage and operating costs paid.
This is just the most basic reason why apartment building investments make better sense. Once renovated at a cost below replacement cost, they are worth more money. Upon showing a profit apartment buildings are also easier to flip. Whether you have the wherewithal to buy a multi-family dwelling individually or as part of an investment strategy with a group of investors, it is a sound investment.