6 Reasons Why Apartments Are Bad Investment

An apartment was my first investment, and I regret it. Why? There is a funny story about that. Learn why I don't invest in them anymore.

The first investment that I ever made was a four-bedroom apartment. It turned out that there was a brothel in the apartment opposite. While that was a lot of fun and makes for a fun story, it didn’t really help my returns on investment.

 I’m not saying carte blanche that apartments are bad investments, but I think there are better investments.

My second investment was also an apartment, but since then I’ve only bought one more. Instead, I focus on other types of commercial and residential property.

Here are six reasons why:

Less Control

I believe in having control. The more control you have over your investments, the better returns you’re going to make. When the market turns, you need to be flexible and change things.

In an apartment, you usually can’t do that. You’re stuck renting it to families—you can’t change the use to business, multiple participants, or multiple occupants.

Unexpected Costs

If something goes wrong with the property, guess who’s going to pay for it? You. As one of the property owners, you will be paying at least a portion of whatever damage occurs or repairs need to be made.

Neighbors

The more people around you, the more potential problems you have.

If you choose good tenants, you’ll have less problems. Talent selection is one of the most underrated parts of real estate investment.

But even though you might choose a good tenant, the other owners may not. You might have three or four people, or even just one person, who is a troublemaker. It’s a nightmare when that happens.

Additional Rules

Sometimes apartment buildings have all kinds of crazy rules. Why limit our options?

Land Ownership

One of the great things about investing in property is that you get the land. Not true for apartments. In some parts, of the world, you have shared ownership of land where you might own a percentage of it. In either case, the land isn’t in your full control.

Limited Options

There is usually just one way to rent the property, and that’s to a single family. Again, this limits the amount of flexibility that you have in responding to the market.

When we had the advent of Air BNB, everyone wanted to rent their properties. Some apartment buildings won’t allow that. Optionality is a good thing.

What’s the alternative?

I like detached houses or villas. That’s going to give me the most control, and that’s what I like to invest into.

 

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Sunil Jaiswal

Investor & Entrepreneur

After building a multi-million pound portfolio in the UK, he realised that he could add more value to the lives of people by helping them think out of the box, giving them knowledge and confidence to make intelligent decisions.

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