| Why buy apartment buildings? Well, you
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| | or income that seems too high. Review the
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| should get more cash flow than with
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| | rent roll, and find out if the rents are
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| rental houses. Of course, big projects do
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| | over or under the market rates for the
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| take more time and research and cash, but
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| | area. If there are employees, look at the
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| then they pay you for year after year.
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| | payroll records for any surprises, like
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| It is easier to start investing in single
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| | accrued vacation time that you'll have to
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| family homes than apartment buildings. If
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| | pay.
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| you have done so, however, you have
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| | Do an interior inspection to learn about
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| noticed how difficult it is getting to
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| | the place, the tenants, and any problems
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| get positive cash flow from houses. Even
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| | that you will have to fix in the coming
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| if you do squeeze a little out of each,
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| | months or years. Look for pests, water
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| it can take a lot of them to have a
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| | and fire damage, as well as obvious
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| decent income.
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| | "problem tenants." Are there any empty
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| Like in a Monopoly game, at some point
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| | apartments that are listed as occupied?
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| you may want to trade in your little
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| | Use professional inspectors as needed for
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| green houses for a big red apartment
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| | pest inspections and safety inspections.
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| building. One apartment building may
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| | The local Fire Marshall may do a free
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| provide as much cash flow as twenty
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| | inspection to verify that the building
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| little houses. And once you have
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| | meets current codes.
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| management in place it may be a lot less
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| | For the exterior inspection, you will
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| work.
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| | want to first walk around and take notes.
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| How To Buy An Apartment Building
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| | Watch for anything that looks unusual or
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| Rule number one? Buy properties that will
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| | in need of repair. Then you can get
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| have positive cash flow from the start,
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| | professional inspections, if necessary.
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| based on the current income and all of
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| | You want to verify that the electrical
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| your projected expenses including
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| | and plumbing systems are up to date and
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| management. If the current owner doesn't
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| | meet current codes. You also want to get
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| have management, that is his problem. You
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| | an estimate on how many years of use the
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| are an investor, not a manager, and a
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| | roofing has left. You'll look at
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| good income property should pay for
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| | driveways, landscaping, and exterior
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| management and still produce positive
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| | paint condition.
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| cash flow.
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| | Call local authorities and check for any
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| Do your due diligence? Here's a simple
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| | permit problems or zoning or encroachment
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| definition of the term: "Investigation
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| | problems. If there have been fire code
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| and verification of the details of a
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| | violations, were they corrected?
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| particular investment." You can start
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| | Get the help of an accountant to decipher
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| this process before you make an offer,
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| | the books. Have a lawyer review your
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| but you should also have clauses in the
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| | offer and any documents. Ask what other
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| offer that allow you to have inspections
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| | things you should be doing.
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| done, and reviews of the books and
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| | Take notes, and list problems, and
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| certain documents.
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| | estimated costs to correct them. You can
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| Look at the files, to verify income.
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| | use these notes during subsequent
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| There should be rental agreements signed
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| | negotiations. The problems investors run
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| by tenants, and rental histories showing
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| | into when buying income properties are
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| if there are any problem tenants or late
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| | usually not unforeseeable. They can be
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| payments. Look for rental deposit
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| | avoided or resolved if you just do your
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| documents also, to see amounts and where
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| | due diligence. Use a checklist so you
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| the deposits are kept.
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| | won't forget anything.
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| Ask to see service contracts and
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| | Prices are based on income. When buying
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| agreements. Do they transfer, or are you
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| | apartment buildings, many investors will
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| free to seek better deals? These can
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| | look at the "cap rate" of a property to
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| include property management agreements,
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| | determine if it is a good investment at a
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| landscaping, snow plowing, pool cleaning
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| | given price. Not sure how to figure
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| service, and cooling system maintenance
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| | capitalization rates? Just be sure that
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| agreements.
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| | there is more income coming in than the
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| Get the last 24 months income and expense
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| | total money you'll be paying out each
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| statements, and look for anything
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| | year. Then make sure that this cash flow
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| unusual, like expenses that are too low
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| | is enough to justify the cash you invest.
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