Q&A: Apartment buildings

Hi Olly,

In the US, they have apartment buildings where you can buy the entire building, and the cap rates are at commercial rates. They seem to be good for cash flow if you can manage them well. Safer than owning other types of commercial property I guess. The problem is, we don’t appear to have too many of this type of real estate here, if any. What would be the best alternative we have if we want cap rates (cash flow) at commercial levels?

Thanks for any help with my question

Dear Jason
If you have the money there is nothing stopping you buying up all or a great part of an apartment building. I know of several USA citizens who have do this.
But its not all peaches and cream. One gentleman and his wife I spoke to quite recently bought a 450 apartment block in New York. The returns were around 8% net which is huge for the USA. This was an existing block and only too late they discover that many of the units were under rent control. Over the years they have slowly renovated and sold down. The rent control turned out to be a bonus as by the time they could sell the apartments they had appreciated 400%. It was a 30 year exercise but well worth it. They now spend 3 months in NZ. 3 months in Switzerland and cruise the world in between.

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