Critical Success Factors In Multifamily Investing

Considering your first investment? Are you thinking about being an equity investor/partner as part of an acquisition another company is working? The bottom line is you must KNOW YOUR DEAL!!

What type of investment is being acquired? There are different classes of investment properties in multifamily, as well as different markets. Their are Class A, Class B, Class C , and even Class D assets with your highest value class being Class A. Typically buildings that are Class A are newly built high-end apartments. Class B buildings have some age on them, have been well maintained but out-dated items in and around the property are showing age. Class C buildings show signs of serious age and Class D…well we run from them.

Multifamily investment properties are the focus of many seminars and shouting men in late-night infomercials, but they can seem intimidating at first, especially when compared to a simple single-family home. The truth is that these can be great investments for you if they fit with your identity as an investor. There is only one way to know if they do, and that is exploring all the advantages multifamily real estate has to offer.

It’s all under one roof

Would you rather have 15 single-family homes across the city to handle or 15 units under the same roof in the same location? When you have 15 different properties all over the place, you’ll probably need more than one property manager. With all those units in the same building, however, you can get by with just one. Even if you up the ante with 70 units, you will likely still only need one manager on location or a management company that deals with tenant problems, rent collection, the grounds and other duties. Keep in mind that your property manager or company needs to be on top of matters. You should still have a backup plan in case it doesn’t work out. When it comes to investing in real estate, you never want to leave a single point of failure.

Appreciation is easier

Unless you’re incredibly lucky, appreciation won’t just happen. Generally speaking, you’ve got to take specific actions to bring your property’s value up or add in amenities and other benefits that will push up the value for you. This is far easier said than done when it comes to single-family homes. Sure, you can invest in a rehab to increase the functionality of a single-family property. You could carry out some outside work to boost its curb appeal. But, all this time, money and effort will only benefit one property and therefore one tenant. On the other side of the fence, when you boost the appeal of a multifamily property, you’re doing so to benefit multiple units and satisfy more than one set of tenants. You’re also helping to keep your cash flow secure and making your property attractive to potential new tenants, all in one fell swoop.

Your value is more likely to hold

Once you’ve got a multifamily property how you want it and are appealing to tenants with a steady cash flow, you’ll be in a position where your property will generate interest among investors when you’re ready to sell. As long as you maintain it, you’re likely to keep and grow your property’s value over time. This is more difficult with a single-unit property. The smaller income stream those properties generate simply does not shield them from the ups and downs of the real estate market.

There are ways to generate alternate revenue

With a single-family home, you’ve just got your rent for income. In multi-unit properties, however, there are often ways to generate even more revenue beyond rent. A spare small unit, for example, could become home to a coin-operated laundry room. Your tenants will be happier, and you’ll benefit from their patronage.

If multifamily investing is something you’re interested in, now is the time to make a move if you’ve got the right plan. The rental market is booming. REI Women’s comprehensive, multifaceted strategy always keeps investor goals at the forefront. We identify and evaluate assets and fully preparing for the future.

Look before you leap

Your investment is going to be what you make it, so you need to go in as prepared as possible. The first area you need to explore is the markets that interest you. Review demographics and average rents in the area. Run comparisons on properties to get an idea of what you and the area’s tenants are looking for and what your costs may be. Choosing a market that isn’t right for you can hurt you in the long run. It’s important to be where you want — and can afford — to be.

Your return on investment (ROI) is important to know. To get an accurate picture, you’ll have to put in some research. For a proper investment analysis, good numbers are crucial. Your ROI calculations should include, at the very least, the average income generated by the property and all the related costs, including property taxes, maintenance and other expenses.

Last but certainly not least, you need to know where your investment money is going in detail. As with any other investment, you should never part with your cash without having a breakdown of how it will be spent so you can make the most informed decision possible.