Investing in apartment buildings, especially multi-family apartment buildings, has become a common venture for those dipping their toes into the investment business. They are in some ways, easier to understand than other properties as most people have lived in/around an apartment building at some point in their life. Despite this, some factors should be taken into deeper consideration.
The Market
It’s a golden rule of business to observe and understand the current market conditions of any project or industry you’re involved with. In this case, you should be familiar with such things as market cycles and their implications on investing, as well as economic conditions that could affect rental demand. It’s a bit of a rabbit hole when it comes to this kind of research, so once you get into it – there’s no limit to the kind of information you could find.
The Competition
Yet another golden rule of business – know the competition. Here, it means to know what conditions similar apartments are operating under; their rent, the amenities on offer, and vacancy rates. While certain apartments such as Cinnamon Life Apartments in Sri Lanka offer many in the way of amenities, this may not be the case for competitors. You could even take this a step further and look at upcoming apartments, or planned apartments. This will help you understand what could affect the value of the property you’re investing in.
The Conditions
Apartments in Colombo – Photo by Sadeep Jayashankha on Unsplash
As part of your evaluation of the property, you should look into the things that make the apartment function – such things as ventilation, plumbing, shelter, and so on. A lot of apartments in Colombo may not need such stringent procedures, but it’s better to do your due diligence. If these centralized systems need repair, it changes things with regard to your cost structure and forces you to re-evaluate your total investment cost. In addition to these central systems, you should also analyze the units themselves, as to their general condition and aesthetics.
The Occupancy
It’s important to understand where the apartment lies, in terms of occupancy. Is the vacancy rate too high? If so, you should try and endeavour to find out why – it could mean that the asking rates are too high, or a certain facet of the building is unattractive. Knowing this information could help you solve the issue in the long run, therefore maximising your profit margins.
