There are clear signs that show just how accessible the real estate industry really is today. We have seen more properties changing hands these past couples of years, so you know there are more opportunities to make money in the real estate market. There are also more projects funded and owned by new players, including the construction of new townhouses and apartments.
Building your own apartment complex is actually not as difficult as you think. There are more financing options and resources that can help you get your first project rolling. You can access these resources even if you are relatively new to the industry. Before you begin your first project and build an apartment complex, however, there are nine important things you need to know first.
1. Planning is Crucial
Even the most experienced investors and real estate companies work on meticulous plans before starting their projects. You should too. Despite knowing everything about the project and the market you are entering, a lot of things can still go wrong, and you have to anticipate those things before you get started.
The sheer complexity of the project also makes good planning essential. When you have workers and materials to organize, timeframes to stick to, and a budget to work with, you will begin to see the true benefits of planning materializing as you go along.
2. Know the Area
Since this is your first apartment complex, it is highly recommended to choose a location or an area that you know well. This will not only save you time in doing community and environment research but also help you avoid unnecessary risks that may harm the value of your apartment complex.
Studying the market to learn more about what it needs is also easier when you know the neighborhood. You can offer the amenities suitable for that neighborhood and set your prices accordingly.
3. Check the Rules
One of the more complex sides of the real estate business is the regulations governing it. Before you can build an apartment complex, you have to get a permit, run inspections, and comply with other regulations. This also means you need to make sure that the area you selected is in the right zone.
You can file for a zoning change if you happen to have a piece of land in a strategic location, but it isn’t meant to be used as an apartment complex. Zoning can be changed in most cases, but you do have to be ready for added costs and extra time spent on making that change happen.
4. Start Designing
After covering the basics, it is time to start focusing on the apartment building itself. This is the fun part of building an apartment complex. You can work on a design and begin making construction plans. Naturally, you can enlist the help of architects and construction firms for this phase.
While working on a design, don’t forget to calculate the cost of completing the construction of your new apartment complex. Being meticulous with your budget is important, particularly when you take into account the extra costs – and surprise ones – you will have to deal with in the future.
5. Take the Top
Ask any good contractor or investor in this market and you will hear the same secret again and again: always take the top unit for yourself. When calculating how much to charge for each unit, you calculate the cost (and value) of each unit based on the cost of all units minus one.
You are basically calculating how much to sell or rent out apartment units for so you can have the top floor – the prime unit – for free. Some investors also take the bottom floor, especially when it is designed more for stores and commercial areas.
6. Get Financing
If you think getting financing for a project this big is going to be difficult, think again. There are actually a lot of reputable financial institutions that will back your project. Asset America, the leading name in this industry, now offers its multifamily loans to more realtors and construction companies.
Multifamily loans are perfect for apartment developments and similar investments. The loan can be used for buying or constructing an apartment complex as well as for refinancing an ongoing project or existing complex. It is a flexible financing option to look into indeed.
7. Sell on Plans
After having the plans for the building finalized, you can start the construction project. However, you don’t have to wait until all units are ready before you begin selling them. In fact, you shouldn’t either. You can sell units in the apartment complex based on their plans and designs.
A lot of customers are more than happy to wait for a year or two. They know that the price of in-progress or unfinished apartments is more affordable, making them better investments in the long run. Careful planning also lets you finance the entire project by selling units alone.
8. Stick to the Time Table
If you do decide to sell units before completing the project, delivering those units on time becomes crucially important. If you decide to use financing options for the project, sticking to a strict time table also helps with limiting the costs associated with the project.
There will be delays and disruptions along the way, but they should not impact the project strongly enough to cause substantial delays. If you do run into delays, try getting the project back on track without cutting corners or making more potential mistakes.
9. Evaluate and Fix
This is your first apartment complex so you may not end up with the perfect result. It could go over budget or get finished weeks after the initial deadline. Regardless of the issues you come across along the way, do a thorough evaluation at different points in the project and work on solutions for those issues.
That’s it! Keep these nine tips and tricks in mind, and your journey into the world of real estate investments will be a rewarding and exciting one for sure.