As you approach retirement, it may be more appealing to have a source of passive income. You may decide that purchasing an apartment building is the right option for your situation.
Before purchasing an apartment building, there are several factors you should consider.
Apartment classification
Fit Small Business says that realtors use a rating scale to categorize most apartment buildings. This scale uses age and amenities to group complexes. Class D buildings may have stood for more than 30 years, while Class C structures are usually between 20 and 30 years old. Class B buildings are less than 20 years old. Class A apartments were usually constructed within the past 10 years.
A structure’s classification can have significant ramifications. Class A and B buildings may include more amenities, such as newer appliances and exercise facilities. While it may cost more to purchase these buildings, you may not need to do many renovations. However, Class C and D buildings may need significant renovations. This could offset a lower purchase price. These structures may also lack some amenities, such as laundry in each unit.
Structural features
You may not consider the design of a building before deciding to purchase it. However, the design could affect the kind of maintenance a structure needs. An apartment building with a wooden frame, for example, may need more regular upkeep. You may need to invest in treatments to prevent rot and you could also need to paint more regularly. These expenses can result in higher operating costs.
Additionally, some apartment buildings may have flat roofs. Water could pool on this surface, causing leaks, and debris could pile up, potentially causing punctures in the roof lining. You may need to do more regular maintenance with this type of roof.
As you review potential properties, you may want to consider the full cost of each building.
