Are my fears about Apartments logical?

[Daniel Barnes]

Hello, I've recently only dealt with SFH's but, my main goal is to invest in apartments only. I'm getting ready to buy my first apartment deal. A 10 unit apartment that consist of two buildings. They both need some work and I'm looking to put about 60k into the rehab but, I'm only paying 130k for the apartments. Rents are $500 per unit in my area and that seems about right and even a little low for what other apartments are renting for. My concern is that I'm going to have a hard time finding tenants that I'll even want to rent to and I might have to settle for ones that are more headache than there worth, just to keep them occupied. My area isn't experiencing much growth but, has always been really easy to rent out a SFH. I really want to turn these apartments around and make them into something people will feel lucky to have the chance to live in them. Is this a logical concern or am I just getting cold feet because I'm jumping into the unknown? I just don't know if this is an apartment town or more of a SFH town.

[Jailen Holt]

Hey @Daniel Barnes, great question! I think your concerns are very logical and I would want to consider them as well. I'm a few hours south of you in Atlanta, but here in my market we have similar decisions to make. Properties with higher rates of return compared to the purchase price usually mean higher risk tenants. Thats not true for every market but it is here in my part of Atlanta from my experience.

If you decide to jump on the opportunity, which sounds like a great deal if the numbers are accurate (190k all in and 5k gross income before expenses I'm assuming) you will still cash flow very well. Be sure to put each potential tenant through a thorough screening process and background check. Ask for references AND verify and call each. Perform background checks and income verifications on each one. Avoid ones who have frequently relocated and be weary of those with past evictions. Lastly, make sure you stick to your personal criteria and try not to make exceptions. 

Good luck out there man!