How To Buy an Apartment Complex: Apartment Investing
When you own a building with dozens of tenants. Every month, rent comes in, your mortgage gets paid, and the leftover is yours to reinvest or save. Over time, the property grows in value while you collect steady income. This is the power of apartment complex investing.
If you have already explored single-family rentals and want something that can scale your returns faster, apartment complexes might be your next step. They typically have five or more units, which means they are classified as commercial properties. This opens up a different set of financing options, tax perks, and profit potential. Of course, it also comes with more responsibility and higher stakes.
In this guide, you’ll learn the full process of buying an apartment complex from finding the right deal to financing, due diligence, and long-term management. By the end, you’ll know exactly what steps to take to make your first purchase a strong one.
Is Buying an Apartment Complex a Good Investment?
The answer is yes. Buying an apartment complex can be a smart investment in 2025, but it’s not an automatic win. The market has shifted, and the deals that work now are the ones where you buy at the right price, in the right location, and with realistic numbers (especially on expenses).
Here’s the quick breakdown:
Demand is solid
In Q2 2025 alone, more than 116,000 units were absorbed nationwide, one of the strongest quarters ever. National asking rents are also ticking up again; about 0.7% year-over-year as of July. That means renters are still moving in, and rents aren’t falling across the board.
Vacancy is higher than the 2021 lows, but manageable
The national rental vacancy rate is around 7.0%. Some markets (especially those with a surge of new builds) are softer, but many are stabilizing as new supply slows.
Returns are recalibrating
Cap rates have risen from the ultra-low levels of 2021 and are now holding steady. In Q2 2025, core assets averaged 4.75% cap rates, while value-add deals were closer to 5.2%. That’s healthier than the past couple of years, but it still takes active management or renovation to hit strong returns.
Financing is still available, but tighter
Delinquencies on agency loans are low (about 0.46%) but commercial mortgage-backed securities (CMBS) delinquencies are higher at 6.4%, showing stress on over-leveraged properties. Lenders are choosier, and with interest rates staying elevated, the numbers have to work from day one.
Insurance costs are a big variable
This is the line item that trips up many investors. In recent years, insurance premiums have jumped 20–45% or more, with some owners seeing costs double since 2020. In certain markets, that alone has shaved 3–8% off property values.
When it makes sense:
- You’re buying below replacement cost or at a cap rate above your cost of debt.
- The area has steady in-migration and limited upcoming supply.
- You have a clear plan to add NOI through renovations, operational improvements, or ancillary income.
- You’ve stress-tested for higher expenses and flat rents.
When it doesn’t:
- You’re banking on aggressive rent growth in an oversupplied market.
- You’re ignoring tax reassessments and rising insurance.
Apartment complexes can still offer stable cash flow and long-term appreciation, but in today’s market, it’s a selective game. The investors doing well now are the ones who buy conservatively, pick strong markets, and plan for higher costs.
Steps to Buying an Apartment Complex
Step #1 Market Research and Finding Deals
The foundation of a profitable apartment investment is picking the right location and property. Start by looking at areas with clear signs of demand, population growth, new job opportunities, and a strong local economy. The U.S. Census Bureau offers free housing and demographic data that can help spot these trends.
Where to Search
Online marketplaces make it easier to find potential properties:
- LoopNet
- Crexi
- ApartmentBuildings.com
These platforms let you filter by location, price, unit count, and even cap rate. You should also connect with commercial real estate brokers. Many deals never make it online because brokers share them privately with trusted investors.
How to Narrow the List
When reviewing properties, pay attention to:
- Cap rate (Net Operating Income ÷ Purchase Price)
- Occupancy rate and vacancy trends
- Property condition and the age of major systems
- Local rent growth and new developments nearby
This is where you filter dozens of possibilities down to a shortlist that meets your goals.
Step #2 Evaluating If the Property Is Worth It
Once you’ve found a property that looks promising, you need to run the numbers and think about the bigger picture.
Benefits You Can Expect
- Multiple tenants mean steady cash flow even if one unit is vacant
- Lower per-unit maintenance costs compared to scattered rentals
- Potential for appreciation over time
- Tax benefits such as depreciation and mortgage interest deductions.
Risks You Should Plan For
- High upfront investment
- More complex tenant management
- Exposure to local market changes
- Risk of prolonged vacancies
A pro forma which is basically a financial projection, helps you see if the deal is worth the effort. It should include realistic rent income, all operating expenses, and your expected net operating income under different scenarios. If the numbers don’t hit your target return after accounting for risks, walk away.
Step #3 Financing Your Purchase
Financing an apartment complex is different from getting a mortgage for a house. With commercial properties, lenders care most about the building’s ability to generate income.
| Financing Option | Down Payment | Key Features |
| Conventional multifamily loans | 20-30% | Offered by banks, based on property income |
| Government-backed loans | Varies | FHA, Fannie, Freddie Mac – longer terms, lower rates for qualifying property |
| Bridge Loans | Flexible | Short-term, fast funding; good for time-sensitive deals and renovations |
| Private money & partnerships | Negotiable | Flexible underwriting, can reduce personal cash needed |
If you’re in California and need financing, RTI Bridge Loans can help in securing a deal before refinancing into a long-term loan.
When choosing financing, look closely at interest rates, loan terms, amortization schedules, and prepayment penalties. You want a loan that matches your strategy, whether it’s a quick renovation and resale or long-term cash flow.
Step #4 Doing Thorough Due Diligence
Before closing, you need to make sure the property is exactly what the seller says it is. Skipping this step can lead to expensive surprises.
Financial Review
Ask the seller for the rent roll, a breakdown of operating expenses, and tax returns covering at least the last 12 months. You’re looking for steady rental income and expense numbers that make sense for the size and age of the property. If the reported expenses seem unusually low, that could be a sign the seller is leaving out certain costs or deferring maintenance both of which can hurt your cash flow later.
Physical Inspection
Bring in licensed inspectors to look at the big-ticket systems like the roof, plumbing, electrical, HVAC, and overall structure. A small leak or outdated wiring might not seem urgent today, but in a large building those “minor” problems can quickly add up to tens of thousands of dollars in repairs. It’s better to know exactly what you’re dealing with before you sign.
Legal and Compliance Checks
Make sure the property’s zoning permits its current use and that it meets all building code requirements. Also, confirm that it complies with the Fair Housing Act. Be aware that unresolved violations can lead to costly and time-consuming repairs.
Environmental Review
If the property was built decades ago, there’s a chance it could have asbestos, lead-based paint, or other environmental hazards. In some cases, ordering a Phase I Environmental Site Assessment is worth the cost, especially if you plan major renovations or refinancing in the future.
If any of these reviews uncover issues, you can go back to the seller to negotiate a price reduction or ask for repair credits at closing.
Step #5 Closing the Deal
Once your financing is in place and due diligence checks out, it’s time to close.
- Purchase agreement: A written contract that spells out the price, terms, and any contingencies.
- Final loan approval: The lender reviews updated financials and gives the green light.
- Closing day: Funds are transferred, the deed is recorded, and you officially take ownership.
Having a real estate attorney involved at this stage is important. Even small oversights can delay or derail the transaction.
Step #6 Managing the Property After Purchase
Owning an apartment complex is not just about collecting rent. It’s about keeping the property profitable and your tenants satisfied.
Management Options
- Self-management: Full control, but a lot of time and stress.
- Professional management: Usually 8–12% of rents, but they handle tenant issues, rent collection, and maintenance.
Increasing Value
Value-add upgrades can justify higher rents:
- Renovating kitchens or bathrooms
- Adding laundry facilities
- Improving curb appeal
- Installing energy-efficient systems
A higher Net Operating Income not only increases your monthly profits but also boosts the property’s market value.
Tax Planning
Work with a CPA who understands multifamily real estate. They can help you structure expenses and depreciation in a way that reduces your tax bill.
FAQs
What counts as an apartment complex?
It’s generally any residential building with five or more units, which classifies it as a commercial property for financing purposes.
How much down payment will I need?
Most lenders ask for 20–30%, but FHA multifamily loans can go lower for qualifying buyers.
What’s the biggest risk in apartment investing?
Vacancies and poor management can hurt your income the most. Picking the right location and having strong management in place can prevent both.
How long does closing usually take?
Conventional financing can take 60–90 days. A bridge loan can close in as little as 2–4 weeks.
Do I need previous landlord experience?
Not necessarily, but lenders may favor experienced investors. If you’re new, partner with a skilled property manager.
Conclusion
Buying an apartment complex can build serious wealth if you do it with a plan. Start with solid market research, run the numbers carefully, secure financing that matches your strategy, and protect yourself with thorough due diligence. Once you own the property, keep it well-managed and look for ways to increase its value.
If you ever find the right deal but need funding fast, RTI Bridge Loans can help you move quickly. The key is to combine smart buying with strong management so your investment keeps paying you for years to come. Contact us at (562) 857-2285 or through our website.
