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If you’re looking to buy an apartment block, there’s a few things you need to know before you take the leap.
From understanding how many of the apartments are vacant to pricing up the cost of any renovations, buying an apartment block is an extensive, in-depth process that can only run smoothly when well organised and thoroughly researched.
Here are 6 things you need to understand before purchasing:
1: The definitions of freehold and leasehold
If you’re buying an apartment block, it’s likely that you’ll be buying the freehold of the buying, therefore becoming the ‘freeholder’. A freehold is an ownership of land and/or buildings which lasts for the holder’s lifetime, plus that of any successors. The freeholder has lots of responsibilities, such as the building maintenance and upkeep as well as the building insurance.
Leasehold, on the other hand, is the legal term for an occupancy of land or buildings for a fixed period of time, often referred to as a “lease.”
It’s important to understand the difference between the two as it will determine what kind of ownership you have of the block and the responsibilities that come with it.
If tenants buy their apartment within your block, then they will be purchasing the lease.
2: How many apartments are tenanted/vacant
Knowing how many of the apartments in the block are currently tenanted is key in understanding both your short-term and long-term prospects for the property.
If your apartment block is only 50% tenanted, then you’ll need to consider how you’re going to fill the remaining apartments in order to make a return on your investment or upkeep a steady income.
It’s also important to understand that, as the freeholder, you are responsible for all of the vacant apartments until they are tenanted.
3: Hiring a Property Management company
If you’re not planning on managing the block yourself, you’ll need to hire a property management company to do so for you.
This is an important decision and not one to be taken lightly – make sure you do your research into the company and what their fees include, as well as how they follow the relevant block management legislation.
4: What your target tenants will be
One of the most important aspects of apartment block purchasing is understanding who your target market is.
Are you aiming for young professionals? Families? Retirees?
Once you know this, you can work out whether this is right for you, and consider how you’re going to make your block appeal to this market.
It’s vital to consider the location of your apartment block. If it’s close to a school then your tenants are likely to be couples or families with children. If you’re near a university, it’s likely students will be attracted to your apartment building, as well as landlords looking to buy and rent to students.
It’s also important to consider what type of apartments you have – are they one-bedrooms or larger? Does your block have penthouses, balconies or maybe dual-floor apartments?
All of these factors come into play when deciding on who your target tenants will be.
5: How much will need to be renovated
Unless the apartment block you are purchasing is brand new and in mint condition, it’s likely that there will be some renovation work required.
This could be anything from a lick of paint to a full-blown refurbishment, so it’s important to price this up and factor it into your purchase.
Be aware that some renovations may require planning permission, so it’s worth checking this before you begin any work.
6: What you’re buying for
While some buy apartment blocks to increase their income and receive rent payments, others buy apartment blocks as a long-term investment with the view to sell on at a later date.
It’s important to know what you’re buying for and to have a good understanding of your end goal – this will help you make the right decisions when it comes to renovating and marketing your block.
To conclude, purchasing an apartment block is a big decision and not one to be taken lightly.
By knowing what you need to consider beforehand, you’ll be in a much better position to make the right choices for your property and ensure a successful purchase.
As well as this, always make sure to consult with a solicitor and/or property agent who will be able to guide you through the process. How you buy an apartment block and what you need to buy it is different everywhere, so it’s always best to consult with an expert before jumping in to anything that you’re unsure of.
We hope you found this blog post Purchasing An Apartment Block: What You Need To Know useful. Be sure to check out our post 8 Ways to Renovate Your Rental Home to Increase Rental Income for more great tips!
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