What it takes to buy an apartment building in this economy (Or a brief explanation why you shouldn't invest in gold bars)
What it takes to buy an apartment building in this economy
(Or a brief explanation why you shouldn’t invest in gold bars)
By David Bramante
Very few people will ever own an apartment building, but almost everyone will rent at one point in their life or another. Even with the many requirements fulfilled, securing a commercial loan can be especially tough in an economy like this one.
Though retail and office buildings sales have plummeted, with huge retail chains and businesses slamming their doors over night, tenants are still viewing and renting apartments, and investors are still buying and selling commercial real estate everyday. This will never change no matter what economy we’re in.
So what does it take to buy this hot type of commercial building (a commercial / apartment building is considered 5 units or more)? It takes a lot. So if you’re interested in building true wealth, you need to know what is expected and take the necessary steps.
The most obvious requirements are cash and credit. For a conventional commercial loan with an interest rate of 6 to 6.5 percent, you will need a minimum FICO score of 680 and have 30 to 35 percent of the purchase price for a down payment. This is not very different from conventional residential financing at about 5 to 6 percent, where you need a minimum FICO score of 640 and about 30 percent for a down payment. But that’s were the similarities end.
(Example: You will need $225,000 down to purchase a 10-unit apartment building for $750,000).
In Southern California, those aren’t very rigorous requirements because there’s an abundance of cash flowing throughout the region. But obviously, $225k is not chump change and for the large majority of people that live month-to-month on salary, this will never become a reality.
What do you need next? You must be liquid (aka have cash reserves) equal to 6 to 12 months worth of mortgage payments (interest and principal combined) and have a net worth that is equal to or greater than the purchase price of the property (networth equals your assets minus your liabilities).
So that’s what it takes to own an apartment building. It’s a blue print for becoming an apartment tycoon and creating true financial wealth, but these requirements are the reasons why there are so many renters and so few owners, and why investing in apartment buildings is better than investing in gold.
For those that can't buy an apartment building, the alternative is buying up to a 4-unit building, which is a hybrid: You can buy multiple units and collect rent, all the while utilizing a conventional residential loan to purchase the property.
Thanks for reading. Visit my website!
www.DavidBramante.com
(Or a brief explanation why you shouldn’t invest in gold bars)
By David Bramante
Very few people will ever own an apartment building, but almost everyone will rent at one point in their life or another. Even with the many requirements fulfilled, securing a commercial loan can be especially tough in an economy like this one.
Though retail and office buildings sales have plummeted, with huge retail chains and businesses slamming their doors over night, tenants are still viewing and renting apartments, and investors are still buying and selling commercial real estate everyday. This will never change no matter what economy we’re in.
So what does it take to buy this hot type of commercial building (a commercial / apartment building is considered 5 units or more)? It takes a lot. So if you’re interested in building true wealth, you need to know what is expected and take the necessary steps.
The most obvious requirements are cash and credit. For a conventional commercial loan with an interest rate of 6 to 6.5 percent, you will need a minimum FICO score of 680 and have 30 to 35 percent of the purchase price for a down payment. This is not very different from conventional residential financing at about 5 to 6 percent, where you need a minimum FICO score of 640 and about 30 percent for a down payment. But that’s were the similarities end.
(Example: You will need $225,000 down to purchase a 10-unit apartment building for $750,000).
In Southern California, those aren’t very rigorous requirements because there’s an abundance of cash flowing throughout the region. But obviously, $225k is not chump change and for the large majority of people that live month-to-month on salary, this will never become a reality.
What do you need next? You must be liquid (aka have cash reserves) equal to 6 to 12 months worth of mortgage payments (interest and principal combined) and have a net worth that is equal to or greater than the purchase price of the property (networth equals your assets minus your liabilities).
So that’s what it takes to own an apartment building. It’s a blue print for becoming an apartment tycoon and creating true financial wealth, but these requirements are the reasons why there are so many renters and so few owners, and why investing in apartment buildings is better than investing in gold.
For those that can't buy an apartment building, the alternative is buying up to a 4-unit building, which is a hybrid: You can buy multiple units and collect rent, all the while utilizing a conventional residential loan to purchase the property.
Thanks for reading. Visit my website!
www.DavidBramante.com
Labels: commercial investment, commercial loan requirements, Commercial Real Estate, David Bramante, down payment, FICO score, gold bars
posted by David Bramante at
10:25 AM
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