How To Make Money Investing In Apartments

In today’s world, building wealth has never had so many options. Making money investing in apartments may not have the lowest barrier of entry for some investors but remains a top option for savvy investors looking for positive ROI and an opportunity to build a strong portfolio.

Investing in apartments does not always equate to making money, especially in the early stages of your investment. Investing in apartments comes with a lot of overhead, costly mistakes can happen and it’s important to do your research and due diligence before investing any serious amount of cash.

Many investors jump into situations too early without the expertise or knowledge and burn through a rainy-day fund too quickly.

On the flip side, investing in apartments can be extremely lucrative if done correctly. Here are some of the top options for making money investing in apartments in 2022.

How To Make Money Investing in Apartments

Depending on the initial investment you are working with or your own risk profile, you have several options you can explore to begin making money investing in apartments.

The digital world has arrived, and in 2022, the options that investors in the past didn’t have at their fingertips have given you more options than ever.

Depending on your personal preferences, how hands-on you want to get, or how much ownership of the investment and apartment building you prefer will determine which option you should lean towards.

Any of the options we discuss below are viable and can kick start you in the real estate investment world.

1. Crowdfunding to Invest in Apartments

The options we have in today’s world that sit a few clicks away are crazy. We now live in a world where you can jump into apartment investing through trusted and reliable real estate platforms.

They have genuinely shifted the landscape and investing in apartments has never been easier.

While it may not be a hands-on approach or give you 100% ownership over a property, it can 100% meet the demand of apartment investors looking for a passive approach and has the lowest barrier of entry.

Perhaps, not a low barrier of entry from the financial side but when it comes to true or pure knowledge of apartment investing, this is likely the easiest approach for many trying to get a foot in the ring with apartment investments.

In the early days, apartments and all real estate investing seemed to be reserved seating for the most affluent and wealthiest in the world.

In 2022, that is no longer the case. Options like crowdfunding allow those of us, even with a modest rainy-day fund, to jump into the game and begin our real estate investing endeavors in hopes of high, passive returns on investment.

However, nothing is perfect. Here is a quick overview of the pros and cons of investing in apartments using the Crowdfunding approach:

Pros

• Highly Accessible and Easy to Begin
• Initial Investment Requirements Are Much Smaller
• Truly Passive Apartment Investing Approach
• No Overhead or Property Management to Handle

Cons

• Can Be Tough to Choose the Right Crowdfunding Platform
• High Number of Investors at Smaller Dollar Amounts
• Lower Relative Returns
• Not Considered Liquid (Tough to Cash Out During an Emergency or Financial Crisis)
• Lack of Control

2. Consider REITs To Invest in Apartment Real Estate

Real Estate Investment Trusts (REITs) have been around for decades. They are still one of the most viable options to begin investing in the real estate world.

In a nutshell, REITs pool funds from several investors (like crowdfunding) to purchase real estate assets.

REITs are very similar to Mutual Funds. The primary difference is that REITs purchase income-generating properties and real estate such as apartment buildings.

REITs offer many advantageous benefits for those looking to invest in properties but don’t come without some drawbacks.

Here is an overview of the pros and cons of REITS:

Pros

• No need for a commercial lender.
• No lease agreement
• Produces passive income
• Great For Longer Term Investments

Cons

• Sensitive To Interest Rates
• Dividends Are Taxed
• Not Best for Short-Term Investing
• Trends Can Impact REITs
• Higher Fees Associated with REITs

3. Use Your Own Cash and Buy Apartments on Your Own

Purchasing your own apartment building can be the most involved but rewarding avenue you can take if you want to make money investing in apartments.

Purchasing your own apartment building will give you plenty of options and 100% control.

Whether you want to offer 2-bedroom apartments for rent or have an apartment complex that offers units ranging in size, bedrooms, and features, the control will be in your hands.

You will even control other aspects of the renting process, such as offering pet-friendly apartments or deciding that your units allow no pets on the property.

The point is simple. It is your property, and those calls are yours to make.

The investment needed upfront will be the highest, and the risk will also be higher, especially for someone with no real-estate background and education.

You will need to familiarize yourself with things like property management companies, overhead, cash flowing your business correctly, and even local and county building codes.

Much more work will go into this method, but the returns can be 15% or higher conservatively once you get your feet on the ground and build your real estate portfolio.

Here is a look at some of the pros and cons of investing in apartment buildings 100% on your own with your own funds:

Pros

• Property Values Can Increase
• Produces Great Cash Flow
• Can Truly Reach Financial Freedom (Long Term)
• Several Tax Benefits

Cons

• The stress of Tenants Paying Timely
• Will Require Mortgage Payments 
• Not The Best for First Time Apartment Building Buyers
• Not As Liquid as Rental Houses
• Requires A Property Manager or Property Management Team
• Needs Some Real Estate Education

4. Join A Syndication

Using syndication for your apartment investing can be a great way to make money investing in apartments without dealing with tenants or having a proper knowledge of all aspects of apartment real estate.

If you don’t know how to handle the construction side of apartment investing, local codes, and ordinances, or maybe you don’t even want to deal with property management in general, syndication can be an excellent option for you.

Using syndication for your apartment investing is a true way to make passive income removing all the aspects of management from the equation.

Individuals who choose to use syndication to invest in apartments will not deal with rent payments or maintenance issues.

Using syndication to invest in apartments will also remove the risk of your expertise potentially losing you money.

Syndications are typically experts, trusted, and handle everything about the property themselves outside of your investment into the property.

Suppose you don’t feel comfortable managing these outside factors on your own or don’t have a solid plan for your real estate investing. 

In that case, you should consider syndication before making any final decisions.

Here is a look at some of the most known pros and cons of investing in apartment buildings using syndication:

Pros

• Eliminate Some Risk by Investing with Experts
• You Don’t Pick Up New Debt and Mortgages
• Different Property Classes to Invest In (Outside of Apartment Buildings)

Cons

• Syndications Are Not Liquid Investments
• You’re Not the Boss, And You Don’t Have Control
• Lower Upside Compared to Pure Ownership of Apartments

5. Pool Your Money the Old School Way

Another option that many investors overlook when they begin considering purchasing apartments to make money is leaning towards your investors (so to speak).

While crowdfunding and syndications can be a great option, using your own network and available cash flow from relationships may offer more upside and get the job done.

Perhaps you network with other like-minded individuals with the same goals as you and cash on hand to get in the game.

If this is the case, you can consider getting your network together to pool cash to outright purchase an apartment building using a mortgage and traditional methods for real estate purchasing.

Many will shy from this method because it can get a bit muddy mixing business and money with friends, family, and other business professionals.

The truth is that it can work and offer some of the benefits you lose when you use crowdfunding and syndication, such as decision-making and control over the properties and investment opportunities.

Here’s a look at some of the pros and cons of using this method to invest in apartment buildings:

Pros

• More Control Over Investment Opportunities
• Control Over Property Decisions
• Higher Upside for Market Gains and Cash Flow

Cons

• Risky Based on Education and Experience
• Often Requires Debt to Be Taken on By Parties Involved
• A Solid Business Plan Needs to Be in Place
• Higher Risk for Market Downturns
• More Time and Management Is Required by All Parties (Not Passive)

Reasons Apartments Are Considered a Good Investment

Making money investing in apartments is still a highly viable approach to diversifying a portfolio and building wealth.

It’s also a widely competitive investment strategy with a lot of wealthy players looking to get their hands on lucrative cash flowing apartment complexes.

It makes sense if you have the cash flow to bootstrap the investment for major returns in the future.

Depending on your strategy and initial cash on hand, the level of difficulty and rewards varies. Here are some primary reasons apartments remain a good investment and way to make money in 2022.

1. Apartments Cash Flow and Produce Income

Apartments remain a cash cow when it comes to cash flow. With the right property management strategy and a good plan on where to purchase apartments in the right markets, apartments remain an excellent investment.

This assumes all other factors, such as experience, liquidity, and general education in the real estate market, are sufficient.

Compared to other investments, apartments can offer better cash flow, higher ROI, and rising property values. The rent provided by tenants can continue to pay down the initial debt when investing in your property.

As the debt decreases, you will continue cash flowing your units, eventually reaching a point of much more profit.

Especially for apartments with a high number of units and in a desirable, high-demand area where it remains easy to rent a unit without much advertising or additional effort.

2. Apartment Investing Provides Tax Benefits

Another significant benefit when investing in apartment complexes is the tax benefits you can gain.

The list of potential tax breaks for owning an apartment complex is much better than those gained by investing in single-family homes.

For example, as the owner of the apartment complex, you could deduct the following expenses:

• Mortgage Interest Paid
• Repairs and Upgrades to the Unit
• Certain Utilities
• Different Insurance Premiums

In the investing world, any chance you get where you get tax breaks is often desirable and a huge factor to consider when building a portfolio that produces income and remains diversified and full of additional benefits.

3. Accelerate Wealth Building

Another benefit you can gain by apartment investing is building a real-estate portfolio faster.

Suppose you are the kind of individual who wants to have investments in multiple buildings or diversify your apartment portfolio. In that case, you can spread investments and build wealth fast.

Of course, this will depend on your current cash available for investment. Still, the ability to do so can be credited to crowdfunding platforms.

Many of the best crowdfunding platforms allow you to view the potential investment and allocate funds in increments, such as:

• $5000.00
• $10000.00
• $15,0000.00

Or more.

4. Continue Building Value

One of the most popular reasons for making apartment investing attractive to many investors is simple.

You can build the value of the property as the years go by.

While this isn’t always a slam dunk situation, and the chance of loss is undoubtedly at play, real estate almost always gains value in the long haul.

Especially when you are savvy and detail oriented during the purchasing phase.

Finding the correct locations with heavy demand, rising markets, and overall appeal to the public is a huge factor in the beginning.

You can also benefit from the cost of maintaining one apartment building may be cheaper in the long run compared to managing several homes, upgrading them, or performing general maintenance.

This is typically when you see property management companies come into the mix.

As the investor and owner, you can continue looking for the following opportunities, making decisions on current properties, and maintaining a more passive role with your apartment properties.

5. Continue Boosting Income with Upgrades

Another overlooked part of investing in apartments could be opportunities that others simply missed.

In some situations, apartments are overlooked based on location or current condition.

However, with the proper cash flow and the right business plan, some upgrades and renovations could be the magic mix to boosting returns.

While this would need detailed planning, it could be possible to upgrade older apartment units and begin styling them for the current market.

With some new appliances, a facelift to the property's exterior and some additional upgrades, you may be able to boost renter capacity beyond what a previous owner could do and find a big ROI in the long game.

6. You Can Find the Missing Piece the Previous Owner Didn’t 

You can also be considering a more aggressive marketing strategy than previous property owners were willing to do, or perhaps they didn’t have the cash flow to do so.

With a world hugely focused on mobile devices and the internet, sometimes renting out your units could be as easy as creating a solid online presence and a strong marketing strategy.

Running ads on platforms like Google Ads, Facebook Ads or even YouTube ads could increase exposure.

If the location is good, demand should be high, but the previous owners were not getting it done; consider getting yourself online and in front of potential renters.

This can get your cash flow streaming and capacity closer to the max and allow you to begin paying down the debt you took to purchase the property.

Final Thoughts, Investing in Apartments Has Never Been Easier

Making money investing in apartments isn’t for everyone. Some of the options presented above require some knowledge, trial, and error, and savvy business individuals to make successful.

However, thanks to a world transformed by technology and digital options, investing in apartment buildings has also never been easier.

Whether you have $5,000.00 available to invest in a crowdfunding platform or enough capital to purchase an entire apartment complex, the return on investment can be high and super dependable.

Not to mention, real estate remains a sector that, if you analyze it over the long term, typically has a solid chance to gain value.

While single-family and multi-family homes may be easier to liquidate and flip immediately, apartment investing to make money can be highly lucrative.

Just be sure to do your research first and surround yourself with knowledgeable individuals who have been where you are trying to go.