Apartment and Multifamily Property Investment

agosto 29, 2018

Apartments and Multifamily is the BIG Thing

While the US housing market suffers from lack of housing, recent diminishing construction, and higher financing costs, one sector of real estate is shining — apartments and multifamily developments.

Property investors often cling to the notion that land and single family housing offers the best ROI. Now that house prices may be reaching peak levels, capital appreciation rates are slowing. Land is valuable, but the ROI per house or townhouse is lacking.

With 80 million babyboomers retiring, and a lack of single housing units being built, the demand for multifamily developments will keep increasing. And should a recession happen 5 years ahead, the multifamily sector won’t see its renter base diminish to the degree that home ownership will.

In fact, with wage growth and strong employment, demand for rental units has never been better. Additionally, colleges and universities aren’t building dormitories, so additional demand from students enhances the apartment rental market. Renters prefer to live near downtown CBDs, transit, beaches, restaurants, entertainment and services.

Need to know more about rental markets? See our posts on rental housing in San Francisco, Denver, Phoenix, Los Angeles, New York, Las Vegas, San Jose, Toronto, and San Diego.

The best cities to buy rental property might not be those you’d expect. See the rankings. Check out the ManageCasa apartment management solution now.

Many multifamily buildings are old and in need of renovation and repair and with the economy so positive, and investor funds available, it’s likely these improvements will happen. That means big ROI on capital investment on these developments. Condos and apartments in newly constructed buildings too are in increasing demand.

That will push rents up and improve rent yields for property managers and owners. Most new apartment/condo developments are upper tier priced which enhances the potential ROI. It’s unfortunate that the lower tier is suffering. However, the various governments may choose to act on lower income apartment building and this could open up further opportunities for investors and for property management companies.

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Multifamily is the Easiest Way to Get Rich

In an interview with Business Insider, well known investor Grant Cardone had this to say about buying apartments vs houses:

I can go online today and find a 49-unit property priced at $35,000 per unit with an 8% cap (the return on investment based on the income a property is projected to create) for $1,750,000. If you pay cash for this deal at $1,750,000, you would make $140,000 free cashflow per year after expenses. With $450,000 down and financing $1,300,000, the debt payment would be $78,000 per year. This would make you $62,000 cash flow per year. This cannot be done with a home. — Business Insider post.

Growing Opportunity for Property Managers

The growth in demand for property management software coincides with the burgeoning rental market. Investment asset managers need help help in managing their real estate assets and improving returns. That’s only part of the role of the new property manager.

Building apartment buildings from scratch is expensive, so renovating current buildings makes sense. Investors can buy blocks in soon to be renovated buildings and have a property management company manage them.

Should You Hire a Property Management Company?

After you buy a block of apartments in a multifamily building, you have to manage it. That’s something many property investors stumble on. Without a professional approach, the micromanagement creates tenant conflicts, higher costs, and higher apartment vacancy. Finding a good property management company is vital to your investment.

A property management firm helps you:

achieve maximum rents
set the right rental price
keep units rented – lowering vacancy
manage all documentation and repairs
screening tenants and fill vacancies smartly
manage tenants and respond to their requests
they manage the property saving you from hard, time consuming work
they can utilize property management software to streamline and improve operations
they assume some of the risk and liability
they do your bookkeeping and accounting
they ensure invoices are paid on time
they are insured

The greater value of apartment investing comes from many sources. In general, apartment blocks will grow in value due to affordability, availability and demographics changes happening right now and forward past 2020.

See our posts on multifamily rental housing, improving earnings, positive cash flow, finding the best type of rental property, Tricon Capital’s purchase, and finding properties with high rent to price ratios.