Why do we prefer apartment complexes?
 
Stable Returns - The investor knows what returns to expect. When an investor purchases an apartment complex the previous owner will make available the previous two to three years of income and expense. By using this information the investor can be reasonably assured of the future performance as income typically does not vary much from year to year.
 
Diversified Tenant Base - An apartment complex with 100 units has 100 tenants. If one tenant moves out or defaults on their lease this is anticipated and even planned on. Compare this to owning an office building with four tenants or a shopping center with ten tenants. If one tenant moves out in a shopping center or office building the results can be catastrophic. Apartment complexes mitigate the risk of tenant default by having a large tenant base. In our opinion they are the safest possible commercial real estate investment.
 
Strategic Leveraging - The advantage of owning real estate to most other investments is the value of using leverage (a bank's money) to increase your return. For example if a bank is lending at 5% and an apartment complex returns higher than 5% the purchaser is now making money on the bank's money which leads to higer overall returns. Interest on bank loans can also be written off in most situations to add another profit center to the investment.
 
Ability to Wait Out the Market - People will always need a place to live. An apartment complex can be financed for up to 30 years. During the time of ownership the owner is receiving a constant cash return enabling the ability to watch the market and sell at the ideal time. 
 


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Dobbs Real Estate
2406 Lake Austin • Austin, TX 78703
Phone: (512) 473-0808 • Fax: (512) 473-0909