How To Identify An Armchair Real Estate Investment

Whether you are looking to diversify your portfolio for retirement or looking for a long-term investment outside of the stock market, acquiring an apartment building can be a great investment option. So – how do you find the right apartment building to invest in? If you are looking to be as hands-off as possible, you will be looking for an “armchair investment.”

An armchair real estate investment is a property that is already producing the financial returns that you desire and is a way to allocate your investable assets without disrupting your normal activities. You may think you don’t have the time or skill for a multifamily investment, which is why this type of real estate purchase may align with your abilities and long term investment goals.  Here is what you should look for to find an ideal armchair investment:

Good Condition & Operations

When you are looking to buy an armchair (aka turnkey) apartment building, it should be able to run the same way after the acquisition and change in ownership with no physical or operational changes to the property. This differs from other commercial real estate transactions where the buyer plans to make physical improvements and/or changes in management and leasing after the closing of the property. (Otherwise known as a value-add investment.)

Understand The Cash Flow & Risks

Ensuring the income and expenses continue as expected through the change of ownership is critical. This risk can be mitigated through proper review of the building prior to acquisition and understanding who and how the management will change. For instance, is it possible to keep the same property and leasing manager on after the purchase? As with any investment, the more risk there is, the more reward there can be. Armchair investments have less risk and for this reason, yields are lower than other types of investments, such as value-add investments that require work from the buyer to increase revenues and control costs.

Don’t Forget To Do Your Due Diligence

You should perform the same type of due diligence for any other investment, whether it is a 10-k review for a stock or an operating statement and proof of collections/expenses on a rental property. If you decide to buy a property, understand the risks and have consulted with trusted advisors (i.e. brokers, attorneys, management companies, wealth managers, and lenders), make sure it aligns with your overall goals. Don’t let emotion become a factor.

Throughout Chicago and the suburbs, there are many armchair investments available. If you are looking to learn more, please contact me to hear about current inventory.