Are you curious about multifamily investing, but not sure how to add this strategy to your business?
Well, you’re in the right place because in today’s lesson, I’m giving you three helpful tips for investing in multifamily real estate.
Chris Urso here, breaking it down. Look, multifamily investing is not so scary or overwhelming, when you have this info.
Let’s get right to it…
#1 - Rental Market Survey
When you’ve found a property to invest in, you must do a rental market survey. This will tell you how your local market is performing.
How do you conduct a survey?
You could do online research, or you could drive around and find all similar properties within a 5-mile radius – and call them up.
You’ll want to speak with the property manager or leasing agent as if you’re a potential tenant. Sometimes, these people are you best source of information because they’re going to dictate how that local market is doing.
And I’m telling you, you’ll be surprised at everything you can learn when you call about similar properties to the deal you’re looking at.
So, you want to know what they’re asking for rent and what their vacancy rates are. Also ask about what improvements have been made to the property, so you know if you’d need to make any similar improvements to your property to get the same rents.
If the rates they tell you are in line with or better than your current market and vacancies are declining, that means it’s a smart decision to buy into your similar target property.
And it should go without saying that if rent rates are declining and vacancy is rising, then you’ll want to pass.
Side Note: Be a little cautious when you’re talking with the property manager or leasing agent. Keep in mind that they may have lower-than-desired occupancy and might be telling you a lower rent than they typically charge just to get the units rented out.
But, simply put, you know it’s a good time to invest in multifamily when rents are high and vacancy is low.
#2 – Funding
With multifamily, you’ll need some sort of financing or funding… whether it’s with conventional banks or private money.
In my company, we go with private investors’ money and we actively work to continue raising those funds.
But, regardless of bank or private funding, you need to put together a sound investment package. It is vital to your success.
Create a professional executive summary with solid numbers that you can present in a clear way to your investors or the bank. This will show them that you have a very good understanding of the way the property operates.
You’re basically proving to them that you’ve done your market research, property research and inspections – and this deal makes sense because of all these factors and the numbers you’re presenting.
It shows the banks and investors that you took the time to put together this important information – meaning you took time to analyze the property and do your due diligence. You’ve done the homework and the info is credible. This is critical.
#3 – Value Add
So, our strategy is to pursue value-add properties.
We are looking for opportunities in a good location that have 20%-30% vacancy and need some improvements. Maybe it’s bank owned, or owned by the same landlord for 30, 40, 50 years…
We look for properties like that – properties that we can add value to.
How?
Well, we’d bring in a new property management team, do some upgrades and improvements, and bring the occupancy level up – all of which essentially creates value.
This is my company’s primary strategy. We love value-add opportunities.
This way, we get a property in a good location at a discount and control our own success. By the time we’re done making all the improvements and changes, in 6 or 12 or 24 months, we could create 20%-30% in equity and solid cash-on-cash returns from those types of deals.
Bottom Line
So remember, do your market survey, put together a solid investment package for funding and consider properties where you can add value.
With these 3 basic principles, multifamily investing could become your new favorite investment strategy.
Share Below
Got any multifamily investing questions or comments? Share in the comments section below.
Conduct a market survey of similar properties within a 5-mile radius to determine rent rates and vacancy rates.
Prepare an investment package to show private money investors or banks that you’ve done your research about a specific deal and that the numbers make sense.
Look for properties that you can add value to, which can create equity and good cash-on-cash returns.
Christopher Urso
is the founder of URS Capital Partners and National REIS. Chris has been investing in real estate since 2001. Over the years he has been involved in all aspects of real estate, from single-family fix and flips, buy and hold cash flow houses, and finally to apartment buildings. His real estate investment career only took off when he purchased his first apartment building 3.5 years ago. He now controls over $15,000,000 of apartments and has raised over $8,000,000 of private money in just over 3 years. He now structures investment partnerships to acquire large apartment complexes and also private coaches investors helping them purchase their own apartment buildings.