Apartment Investing – Top Mistakes to Avoid
Most of the questions I get from apartment investors are along the lines of, “How to Invest in Apartment Buildings” or “How To Get Started”. Just as important is the “What Not to Do” or “What to Avoid” when investing in apartments.
In this article, I want to cover some of the top mistakes I see investors make when owning and investing in apartment properties. In many ways, this is just as instructional, if not more so than learning what to do.
How to Be An Investment Dummy.
1. Do Not Raise Rents.
One of the biggest mistakes I see investors make is not raising rents over the years. This is especially true for investors that manage their own properties. What I have seen is they get comfortable with the tenants that are in place and do not want to increase rents out of fear that the tenants will move out. What they do not know is most tenants expect rents to go up over time, and even if they shop for another apartment they will find that your rents are at market levels.
2. Ignore Expenses.
Not keeping an eye on expenses is another big mistake I see. What happens with a lot of service providers is they increase rates over time, steadily going over current market rates. Owners get comfortable with their insurance agent, for example, and never take the time to shop around for better rates. Again, I am not picking on insurance companies – this can happen with any vendor or service provider.
3. Disregard Maintenance Issues.
This is pretty obvious to people that do not own a property, but once things go into disrepair, good tenants do not want to live there. So the property begins to attract lower quality tenants and eventually the property cannot pay for needed repairs. Many maintenance activities do not cost a lot of money, and by keeping your property looking and functioning well, you will attract quality tenants at higher market rents.
4. Do Not Inspect Your Property.
A lot of owners do not perform regular inspections of their properties. Some do not even visit the properties, and some that do will just drive through, or maybe do a quick walk around the property. Schedule a complete property inspection once or twice a year in addition to your regular checks. Many times this will uncover maintenance or resident issues that would otherwise go unchecked.
5. Let Someone Else Handle It.
Never believe that your property manager will handle everything for you. Many owners will work hard to buy a property, get a property management company in place, and let things go. Do not do this. Keep tabs on everything because you are the one that is bearing all of the risk in the investment. You do not have to be there every day, handling the daily operations, but keep on top of things overall.