With the increasing popularity of real estate investing, more and more investors are turning to platforms like Reddit to learn insider tips and strategies. As one of the most accessible investment assets, apartments have become a focal point for discussion. By following key apartment investing subreddits like r/realestateinvesting, investors can gain valuable insights from experienced landlords. However, with so much information, it can be hard to filter through the noise and find truly actionable advice on mastering apartment investments. In this article, we will summarize 8 of the top apartment investing strategies commonly shared on Reddit.
Leverage Low Down Payment Programs to Enter the Market
One of the most discussed topics on Reddit is how to enter the apartment investing game with limited capital. While traditionally 20% down payments were required, many lenders now offer low down payment options for owner-occupied and investment loans. FHA loans allow down payments as low as 3.5% while still getting competitive interest rates. Conventional loans can go as low as 5-10% down. By leveraging these programs and house hacking (renting out spare rooms), many new investors share how they were able to purchase their first small apartment building or duplex with just 5-10k down.
Focus on Cash Flow, Not Appreciation
Seasoned Reddit investors always stress the importance of focusing on cash flow instead of relying solely on appreciation. While rising property values can be the ‘icing on the cake’, positive monthly cash flow is essential for covering expenses and mortgage payments. When evaluating a potential investment, analyze the current rents and expected vacancies to calculate your monthly cash flow. Aim for at least $100-200/door in monthly cash flow to have a sufficient buffer.
Use The 1% Rule as an Initial Filter
The 1% rule states that the monthly rent of a property should be at least 1% of the purchase price. For example, a $250,000 apartment should rent for $2,500/month minimum. This metric serves as a quick first filter to identify apartments that may cash flow. While the 1% rule shouldn’t be the only criteria, it is a simple proxy Reddit investors use to screen potential deals.
Focus on Value-Add Opportunities
Many Reddit users emphasize seeking out value-add apartment opportunities. Instead of paying top dollar for updated, turnkey properties, target buildings that are under-managed and require light renovations. By adding new flooring, appliances, paint etc., you can increase rents and forced appreciation. This allows you to maximize returns while minimizing the purchase price.
Join Local REIA Chapters to Find Deals
REIA stands for ‘real estate investor association’ which are local clubs that hold monthly educational meetings. Redditers strongly suggest connecting with REIA chapters in your target investment markets. By building relationships with other investors, you can get access to potential off-market and distressed deals before they hit the MLS.
Use Property Management Companies to Outsource Work
Managing rental properties, especially from out-of-state, can be a headache unless you outsource to a property management company. While their fees eat into profits, Reddit investors agree that good property management is well worth the cost in exchange for passive income. Vet management companies thoroughly and compare costs to find the best fit.
Consider Syndicating Apartment Deals
Once you have experience under your belt, Reddit users recommend scaling your portfolio by syndicating larger apartment deals. By pooling capital from private investors, you can buy larger complexes. Then as the managing partner, you earn passive income from asset management fees and a share of the profits.
Maximize Leverage Strategies Like BRRRR
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat and is a popular Reddit strategy for maximizing leverage. First, use a low down payment FHA or conventional loan to acquire the property. Renovate it and rent it out to increase cash flow. Then refinance into a conventional loan to pull your capital back out to reuse on the next deal.
In summary, Reddit offers a wealth of real-world apartment investing advice from experienced landlords. By focusing on low down payment financing, cash flow metrics, value-add potential, using property managers, and leverage strategies, average investors can build their own rental portfolios.