5 Tips for Investing in Multifamily
Updated: Jun 8, 2023
Here are 5 of our best tips to help you when considering your next multifamily purchase.
Tip #1: Location
Location matters! When investing in multifamily, try to buy in major markets and suburban areas such as Atlanta, Dallas, and Indianapolis. While within those major cities, it is helpful to get frontage on main roads that have good curb appeal and drive-by traffic. This will allow more people to see the property as they drive by and in return, you will get more leases up.
Tip #2: Value Add Ability
You need to be able to add value to your property. How do you do this? Value is derived from income. The more income a property makes, the more the property will be worth. Increase the rents, decrease expenses, add ancillary income,
Tip #3: Physical Quality
What is the physical quality of the property? Really spend time getting to know the property and the condition that it is in. While flipping a property is okay, consider how much you need to renovate in order to accomplish the project. You do not want to invest in a property that needs a lot of work such as electrical or plumbing, but rather, cosmetic changes including cabinets, flooring, and countertops. These smaller renovations will add value to the property. Properly budget your renovation cost after a deep evaluation of the property.
Tip #4: Management
Make sure you have a good management company. Do not buy in an area that has a lack of good property management companies, no matter how great the property is. Take the management company into consideration when choosing a location to buy your property. Build good relationships with property management companies so you can rely on them to execute your property business plan effectively.
Tip #5: Exit Strategy
The exit strategy is important and may change. Often people buy property because it looks great on paper and the numbers are great but when you do not have a large demand and pool of buyers, you are not going to get as low of a cap rate on a sale and you are going to expect to sit on the market a little bit longer when you are prepared to sell it. Make sure that you choose a market, that allows you to exit if you need to.