How to Evaluate Apartment Investment Deals

Everyone wants to make the best investment deal possible. Sadly, not nearly as many people have a clue how to evaluate apartment investment deals. What’s a good deal? What’s a bad deal? When do you walk, when do you run?

After this article, you’ll have a primer on how to evaluate apartment investment deals like a pro.

The Lowdown on How to Evaluate Apartment Investment Deals

No one wants to play roulette with their money, even people with plenty to spare. If you want to create a lifestyle earning passive income, you have to start by investing wisely.

Believe it or not, you can live off investments. If you’re smart about how you approach potential multifamily real estate deals and how you assess real estate investments then you can craft a plan to generate passive income cash flow.

Will you be able to live off of the first investment you make? Well no, that’s unlikely. But over time you can make your money work for you - and you’ll be surprised how quickly your nest egg can snowball into something big. Eventually, you will have enough continual passive income that you can consider scaling back your hours at work, or you may even say, “I QUIT” and live a life of financial freedom.

I have many clients that now travel, entertain, garden, volunteer, or simply follow their heart's desire because they made a decision several years ago to make their money work for them. They wanted to live a life of financial freedom, and now they’re doing it. 

It all comes down to this: smart investing.

If you earn $200,000 by the end of your first five-year real estate syndication deal, you could earn $400,000 by the next if you reinvest your principal and profit.

Huh? Did you just do a double take?

Good, the potential return on your investment really is that incredible. 

Before you start researching the best yachts and other such imperative arrangements for your future, you need to find a viable real estate syndication deal. To do so, you must carefully consider some of the risks associated with your next big deal.

Here are the three metrics I want you to focus that beautiful big brain of yours on:

Top 3 Real Estate Variables in a Real Estate Syndication Deal

• The Sponsor

• The Market

• The Deal

You need to get all three of these variables right to get the high-profit return you’re after. Let's break it down a bit more now and start to dig into what makes a solid real estate syndication investment work. If you can get these three elements right, you are one step closer to living off passive income. 

So hang in there, the potential rewards make this upfront research worth it.

The Sponsor

A sponsor is one of the most integral parts of a real estate syndication. They do the legwork so you can be a passive investor. Thus, you need to trust them to do their part. You want a sponsor that is financially solvent, responsible, trustworthy, and easy to communicate with.

Keep in mind that you will be working with your sponsor for at least five years, if not more based on the length of your deal. Choose one with a proven track record that can overcome challenges and produce a reasonable rate of return on investment. Remember that obstacles can (well, they likely will) arise at some point over the course of five years. Just make sure you choose a resourceful and knowledgeable sponsor that can rise to the occasion.

The Market

The sponsor should be familiar with the market associated with your real estate syndication deal, but it's your money going into the deal. Several metrics are used to evaluate whether a market is ready for growth:

• Job Growth & Diversification

• Apartment Supply & Demand

• Landlord Laws and Regulations

• Population & Population Growth

• Affordability

• Submarket Drivers

All of these categories equally determine the plausibility of increasing the price of a multi-family property listing in the market you are evaluating. Ultimately you want to improve the property, raise rents, and then sell for a profit. All of which can only be done if the market supports it.

However, a sustainable market is useless if your sponsor is unable to properly work within it. Make sure to thoroughly talk to your sponsor and ensure they know the ins and outs of the proposed market before going any further. They should be able to answer both general and specific questions about the market without any hesitation.

Are you starting to see just how crucial finding the right sponsor is? Good, it’s so important.

The Deal

At this point, you are ready to sit down and take a close look at the proposed deal. Your goal is to dig through the projections in front of you. You need to understand the financial projections and the risks to ensure that you are comfortable with forging ahead.

Breaking it down a bit further, you need to pay special attention to the:

• Financial Projections

• Equity Structure

• Business Plan

• Potential Risks

Quick Recap on How to Evaluate Apartment Investment Deals

Just as you’d find with any investment, there are also risks associated with real estate syndications. The potential trade-off of a passive income and a high rate of return make them excellent choices for many investors. Through vetting your sponsor, assessing the market, and analyzing the proposed deal, you can minimize your risk while furthering your financial goals. This is the best way to evaluate apartment investment deals when choosing a real estate syndication. Hats off to you for learning more about how to build your wealth while diversifying your financial portfolio.