Guide to Buying Apartment Buildings for Sale in Ohio
Ohio is one of the top five tax climates in the United States, so it is not surprising that you are looking at the various apartment buildings for sale in Ohio as a lucrative investment. However, you should not jump into an investment in real estate without preparation. This purchase can be a great asset if you make a wise choice. Trying to determine how to find apartment buildings for sale in Ohio? Want to know how to buy an apartment complex for sale in Ohio? Are there best practices? This guide, containing the necessary steps and critical tips, will point you in the right direction.
What is the Difference Between Apartment Buildings and Apartment Complexes for Sale?
An apartment building is a single structure that contains more than four units; an apartment complex is significantly bigger and spans multiple structures. When considering what type of apartment buildings to buy, cost and budget are typically the deciding factors.
If you don’t have the budget to buy an apartment building or apartment complex for sale in Ohio, many other options exist within the multifamily properties market. Typically, multifamily properties are single-structure residential homes with two, three, or four units. These properties are called duplexes, triplexes, or quadruplexes (also referred to as fourplexes). The most common types are duplexes and triplexes.
Is Buying an Apartment Building for Sale in Ohio a Good Investment Decision?
Buying an apartment building for sale is typically a good investment decision. Investing in this market can provide reliable cash flow, steady appreciation, lower maintenance and management efforts per unit, and diversification of an investor’s portfolio. However, as with all commercial real estate investments, not all investments are alike. The most important determination is whether the investment would bring a sizable return on investment (ROI). The ROI of investing in an apartment building varies based on factors such as the location of the apartment building for sale (Ohio, for example), the condition of the property, how the price of the property compares to similar properties in the area, what the local real estate trends look like, and how much demand for rental properties is in the area.
Buying a small apartment building for sale in Ohio (or in most places) is a good investment choice for new commercial real estate investors. Investing in an apartment building that’s smaller can help you get your toes wet before jumping in as long as a sizable ROI is projected.
Buying an apartment complex for sale (or an apartment building) may seem daunting and expensive. But with ample planning and the right commercial broker and residential property manager by your side, investing in multifamily properties for sale can be a lucrative, enjoyable venture.
Pros and Cons of Buying Apartment Buildings for Sale
Buying apartment buildings can be an excellent way to build wealth and increase your commercial real estate portfolio. There are many benefits to multifamily investing but, as with all investments, there are some downsides. Below are some pros and cons to consider before you buy an apartment building for sale.
Pros of Buying an Apartment Building
- Reliable Cash Flow: Investors can rely on recurring income from tenants paying monthly rent.
- Passive Income: An investor can significantly reduce the time and effort needed to run the apartment building by hiring a qualified on-site property management team to handle all the day-to-day tasks (and more).
- Supplemental Income: Investors can boost their income from coin-operated laundry machines, vending machines, ATMs, and (where applicable) renting entertainment space to tenants or renting on-site conference space to commercial tenants.
- Steady Appreciation: The value of an apartment building is primarily determined by its financial performance. In time, rent typically increases, which increases the value of the apartment building.
- Better and Easier Financing Options: Lenders typically look at the financial performance of the apartment building, as opposed to the investor’s personal finances. And investors can often use a loan to buy an apartment building for sale with just 25-30% down, or perhaps less.
- Tax Benefits: Many tax incentives and deductions exist for owners of multifamily properties. Some benefits include a mortgage interest tax deduction; the ability to defer paying capital gains taxes via 1031 exchanges; cost segregation can allow for accelerated depreciation within the first 5-10 years of owning the property.
- Lower Maintenance and Management Efforts Per Unit: Typically, all units will be serviced at once, whether it’s repairs or upkeep. This allows investors to save money by hiring one person or team to handle the task at once, and in many instances, save on supplies.
- Diversification of an Investor’s Portfolio with Less Vacancy Risk: Buying an apartment building for sale, as opposed to a single-family home or single office space, will allow an investor to own more units. This increased diversification provides much less vacancy risk since the loss from one vacancy isn’t as impactful with other paying tenants remaining.
Cons of Buying an Apartment Building
- Sizable Down Payment Cost: Buying an apartment building for sale usually requires a large down payment; the amount is typically larger than the down payment on single-family rental properties or single-tenant commercial properties.
- High Turnover Rate: Apartment buildings typically have shorter-term renters than renters of single-tenant properties. On average, tenants in apartment buildings typically stay for less than two years. Due to the high rate of turnover, owners of apartment buildings need to spend ample time finding new tenants, making their units ready to rent, accepting applications, and performing background checks. You’ll also spend money on marketing costs to find new tenants.
- Limited Liquidity: Apartment buildings do not especially have high asset liquidity, and can be hard to sell. Depending on the market, it can take time to find the right buyer. When trying to sell an apartment building, you can’t simply cash in your investment overnight without taking a potentially significant loss.
- Tax Implications When Selling: Owners of large apartment buildings and multi-floor apartment complexes can have liability risks, especially when selling apartment complexes for sale in Ohio with amenities such as pools and gyms, where accidents may be prone.
- Unreliable Tenants: Owning an apartment building means you may have tenants that don’t pay their rent on time or break the rules. Dealing with these matters can be very time-consuming and cost a lot of money.
- Time Management: With more tenants and a larger property, additional time is required to manage the daily operations, as opposed to a single-family home or single-tenant commercial building. But one multifamily property still saves time and money compared to a portfolio of single-family homes or single-tenant commercial properties. And, if you hire an on-site property manager, you can leave all of the daily operations of your apartment building to them!
- Less Profitable if You Don’t Hire the Right Property Management Firm: Outsourcing the daily operations of your apartment building to a qualified property management company can save you time, money, and excess expenses (despite their fee). But you need to find the right property manager who is highly experienced in effectively and efficiently managing an apartment building or apartment complex.
How to Buy an Apartment Building for Sale (14 Basic Steps)
Do you want to know how to buy apartment buildings for sale but don’t know where to start? There are many elements to consider before you buy an Ohio apartment building for sale. When you are looking at the various apartment complexes available, keep the following steps in mind:
- Understand the responsibility associated with apartment ownership and management.
- Determine your investment capability beforehand; speak with a few lenders and get pre-approved for a loan.
- Plan your budget and understand your mortgage payments.
- Consider whether you’d like a new apartment building or a fixer-upper. The latter can be much cheaper, but the required renovations might cost you more in the long run.
- Learn about the various types of apartment buildings (e.g., high-rise apartment complexes, mid-rise apartment buildings, garden-style apartments, and many others).
- Learn about the types of apartment complexes. (Class A Apartment Buildings are typically under 10 years old and have extra amenities. Class B Apartment Buildings are typically 10-20 years old and don’t require much or any renovations but have fewer amenities. Class C Apartment Buildings are typically 20-30 years old but require some renovations and don’t have much or any amenities. Lastly, Class D Apartment Buildings are typically 30+ years old and require heavy renovations.)
- Set your expectations for your investment – what size is acceptable, how many units, which location, etc.?
- Consider your options for a commercial realtor or commercial property broker.
- Always compare as many apartment buildings for sale in the area as possible before deciding.
- Make offers on several apartment buildings for sale. Ohio has many multifamily buildings, especially in Columbus, Ohio. Even if your offer is too low, it will help you become more comfortable with the process. This practice will help you feel more confident when investing in an apartment building.
- Perform your own initial inspection of the apartment building and surrounding property.
- Get a professional inspection and commercial appraisal of the apartment building before making a final decision.
- Attend the closing and truly understand what you are getting before signing the dotted line.
- Determine how much time (if any) you can dedicate to managing the property. If you’re looking to buy a large apartment complex for sale in Ohio, you’ll need help. Research property management companies and obtain quotes from several firms. Choose whether an on-site property manager or 3rd party property manager will better suit your needs. Before hiring a property management company, make sure a contract is in place that covers all of your expectations.
If you’re wondering how to buy an apartment complex for sale, follow the same steps listed above. However, remember that buying an apartment complex for sale requires significantly greater resources, planning, due diligence, time, and help to manage the property.
Keep These Critical Tips in Mind
Owning an apartment complex, although very profitable, can require a lot of work. Ensure you fully understand what you are getting into when buying a rental investment property. And don’t jump into anything too soon. Before investing in apartment buildings, an experienced CRE investor will often complete a long checklist to ensure they cover all bases. Consider these tips when buying apt buildings for sale:
- Contact a commercial property broker who understands the location and value.
- Obtain a commercial real estate appraisal of the property before buying.
- Do your own walk-through with the seller.
- Talk to the people who live in the neighborhood about the location.
- Find out the value of the property, in terms of rent.
- Consider additional costs, such as insurance and mortgage.
- Will you be hiring a property management company? Consider the cost and whether there are any reputable property management companies in the area. (We just happen to know of the best property management company in Ohio… wink, wink!)
- Consider the cost of renting out the units; finding suitable tenants for available rental properties is not always as easy and cheap as you may think.
The good news is that if you cover all of your bases before making a final decision, you’ll have a better chance of a smoother apartment building ownership undertaking. A more extensive and expansive buying process can mean a more profitable purchase in the long run.
How to Find Apartment Buildings for Sale in Ohio
There are many ways to start your search when you’re ready to buy apartment complexes for sale in Ohio. Commercial real estate listing platforms are excellent places to start when searching for on-market commercial real estate. We’ve listed our top picks, below.
Utilizing search engines to find “apartment buildings for sale near me” may also result in some opportunities. In addition, you may find advertisements to buy apartment buildings for sale in Ohio newspapers and on social media, either by the commercial real estate agent or the property owner. Lastly, you may have some success by networking in commercial real estate investing groups in Ohio; try Meetup, LinkedIn Groups, and Facebook Groups.
Choosing to find Ohio apartment buildings for sale (Columbus, Ohio, especially) that are off-market will take more effort but typically result in the best deal. Look through your local Ohio County Auditors website for the counties in which you are interested in looking. You should find apartment building information, useful data on purchase and sale dates, and more. Look for apartment buildings that last sold more than five years ago (as you’ll have a better chance of finding an owner that may consider selling). Then contact the property owners to determine their interest in selling their property. With this method, you may find apartment buildings for sale in Columbus, Ohio (or wherever you’re looking) at below-market prices.
Ready to Buy an Apartment Building or Apartment Complex for Sale in Ohio?
Since you’re considering a rather large investment, you might want to rely on a licensed commercial broker. Have you considered talking to a commercial real estate firm for assistance? Located in Columbus, Ohio, The Robert Weiler Company has assisted commercial real estate investors throughout Central Ohio since 1938. We offer a wide range of CRE capabilities, from commercial property brokerage and appraisals to development, consulting, and property management services. Now, how can we help you find and buy apartment buildings for sale in Ohio? Call 614-221-4286 today to find out.