How to Evaluate and Select Multifamily Investment Properties

Deciding on a property type to invest in is a great first step for any real estate investor. There are many different types of real estate properties, that come with their own unique risks and benefits. Multifamily investing is an excellent choice that is appealing to most real estate investors.

Sometimes the risks and benefits may seem more appealing to the outcome that you envision for your investment. Having the right information on each type of investment is a great way of deciding which one best suits your needs.

Let’s have a closer look at what real estate investment is, as well as how to evaluate and select a multifamily investment property.

Why is Real Estate Investing So Appealing?

Real estate investing is appealing for one main reason. In other forms of investing, such as the stock market, there is a constant fear that the investment may vanish due to unforeseen market fluctuations.

When you invest in real estate, you are investing in a physical asset. This means that no matter how much the market changes, the asset still exists.

While there can be a myriad of different issues that may raise or lower the property value, the right risk management procedure, and opportunity identification can assist in ensuring that your investment is beneficial.

Real estate investments come in many different types of property which include:

  • Corporate or office buildings
  • Storage facilities
  • Multifamily properties
  • Single-family properties
  • Construction projects
  • Raw land holdings

And a myriad of other similar real estate assets that may be on the market.

Multifamily Property Investment

Multifamily property investment is one of the most sought-after and effective means of real estate investment. This property type deals with buildings and properties that have the capability of housing large quantities of renters.

These buildings are often large in size and require a high purchasing power to obtain, but once obtained, provide a significant financial benefit to the investor.

There are many different factors that may impact the price and quality of the multifamily property, so it is always essential to accurately evaluate and select the right multifamily investment for your needs.

Benefits of Multifamily Property Investment

Multifamily properties come with a range of benefits. The main one is a stable source of revenue and rate of return in the form of monthly rental income. These spaces are often easy to manage, due to the fact that it consists of a large number of housing units that are within close proximity of one another while having a positive rate of appreciation.

This makes the process of property management simple because less traveling is needed to ensure the upkeep and maintenance of estate assets.

The secondary benefit that comes from a multifamily property is the tax benefits that it allows. Due to the lack of housing within the country, the government supplies multifamily investors with a great number of tax benefits. This is because the building assists in addressing the housing needs of the population.

How to Evaluate and Select a Multifamily Investment Property

Evaluating and selecting the right multifamily investment will keep your investment on the right path to success. There are many factors that an individual investor needs to consider before obtaining this massive asset. Close analysis of each property is required to ensure that the possible benefits outweigh the potential risks. An experienced and knowledgeable real estate investor knows how to identify a good quality multifamily investment property. Here are some of the factors that these investors consider before making their investment in a real estate asset.

Data Analysis and Market Trends

Data analysis and market trends form the basis of all real estate investing activities. Accurate data analysis allows an investor to identify key opportunities and risks within the market. A good example of opportunity would be identifying where people are moving to, why they are moving there, and what needs they have.

Answering these three basic questions can allow an investor to seek real estate assets that provide the investment with a solid foundation.

Market trends consistently change. Ensuring that your property maintains its appeal in relation to these trends is a key concept to keep in mind. When a property matches the trends that are changing, so too do the potential renters recognize this.

This can help in securing a strong and stable flow of revenue from the investment property.

Geographical Positioning

Positioning is key. When a rental property is positioned perfectly, it can effectively receive the attention of the nearby target market. Amenities are an essential tool that can assist you in knowing if a property is well positioned.

Important amenities include:

  • Nearby hospitals
  • Schools and universities
  • Public spaces
  • Shopping centers
  • Entertainment areas
  • Recreational facilities
  • Access to public transport

These are all factors that potential renters look at before deciding on moving into a residential property. If the desired property is able to meet these needs, the attention that it receives from renters is far higher.

Being closely situated to these amenities also allows your property investment to include higher rental rates.

Cost to Maintain and Renovate

Visual appeal and physical health are key pillars in any multifamily building. Before investing in the property, an investor should attempt to forecast the potential cost it will take to maintain and renovate the space.

In some cases, certain buildings require more care and attention than others. Newer buildings often only require general upkeep and maintenance while some older buildings may require an entire overhaul of utilities and visual appeal.

The cost of maintenance and renovation should not negatively impact the investor. This is a risk that must be considered before investing in the property as certain multifamily homes may require a lot of work to become livable. A building must meet certain standards in order to allow residents to live within its walls.

Potential Renter Market

Identifying the potential renter market and their needs is another great step in evaluating a potential multifamily investment property. As mentioned before, amenities are essential. Some of the other factors may include the surrounding employers and access to the surrounding areas.

A well-positioned property will generally meet these standards and draw in a large portion of the potential renter market. When the needs of this market are met, renters are more likely to stay for longer periods of time which provides a more stable source of monthly revenue.

Being able to lower vacancy rates within the building also becomes substantially easier and faster.

Classification Type

There are three main class types that identify multifamily homes. These class types range from Class A to C. These properties each come with their own risks and benefits, as well as taking the previously mentioned points into consideration.

Knowing a multifamily property’s class type is a good way to gauge the risks and potential opportunities that it may provide.

Class A

This type of property generally has a high purchase price and is difficult-to-obtain rental properties, because they are always in demand by investors. These are usually newer buildings that are positioned in the heart of economically booming regions.

They are closer to amenities and are often the first choice for potential renters. There are exceptions in certain cases where older buildings that are meticulously maintained and well-renovated, are considered Class A buildings.

Class B

The Class B type of property is a step down from A and is located closer to the outskirts of the economic center. Renting a housing unit here is generally cheaper because these properties are not as close to essential amenities as a Class A building.

These buildings usually require minimal renovations and maintenance but are still a good investment to make.

Class C

On the lower end of the class type is a Class C property. This property type is considered to be a riskier investment but any experienced or willing investor is able to turn it into a lucrative endeavor. While these buildings have an exceptionally lower sale price than a Class A or B building, they usually require a lot more work.

Being over 20 years old in most cases, these buildings require a substantial amount of renovations, administrative features, and maintenance before they are considered livable. They are also usually positioned in low-income areas that may have other risk factors such as high-crime rates.

The benefits of this property type are its affordability and easily maintainable revenue stream from consistent renters.

Multifamily Investing Made Easier for Investors

Partnering with the right fund that specializes in the real estate market is the first good decision that an individual investor can make. We are a fund for real estate investors that is geared toward making good property investment decisions.

Our team uses innovative technology to provide our investors with the tools and knowledge needed to succeed. High-quality and beneficial estate assets had been solely reserved for institutional investors in the past, but we have assisted our investors with multifamily investing in these opportunity-driven real estate assets.

Whether an investor is new to the industry, or exceptionally experienced, we are able to provide a platform that truly assists all. Start investing in multifamily properties that focus on bettering your financial investment, contact us at 949-881-7128 at Saint Investment today!