No Comments

Building a multifamily strategy from the ground, up

Real estate investing carries a daunting learning curve, but relax: you don’t need to learn about every niche in the market. While it will serve you well to have a solid foundation of knowledge, if your primary focus is multifamily investing, simplify your education a bit by building your multifamily strategy with a tri-level approach.

The Foundation: Know the Market

Rents in your area will be based upon local demographics and demand for apartments. Do a little research to find out which properties are the “hottest” in your area, and find out why. Do your local renters want luxury, or are they looking for walkability and convenience? Start looking for properties according to what renters want, and what’s forecast to remain in demand for at least 10 years.

The Ground Floor: Choose Your Scale

Multifamily doesn’t only include apartment complexes with a few hundred units. Smaller complexes with fewer than 50 units, and even properties with 2-4 units, offer the economy of scale that makes multifamily so lucrative for investors. More units involve a larger initial investment, more liability, and more potential income for the investor. Decide what level of financing and risk you’re most comfortable with, and go from there. A good financial advisor can really help narrow down your choices at this level of planning.

The Top Floor: Buy, Sell, Flip

Again, decide how involved you’d like to be in the daily ins and outs of multifamily investing before you decide what you’ll do with your investment. In its purest form, real estate investing is a “buy and hold” proposition. You’ll build wealth from tenant rent, and eventually, if you’ve made a good deal, you’ll sell your property for a profit. Flipping properties is popular these days thanks to reality television, but the scale is much bigger, the investment more substantial, and the timeline longer for multifamily flips.

Whatever your approach to developing the best multifamily investing strategy for your portfolio, take that research and turn it into a workable business plan that includes viable exit strategies for every situation. That guarantees that you maximize income and profit by knowing when it’s time to buy more property—and when it’s time to sell.