Knowing where to start when investing in multifamily real estate can be tricky. Perhaps, you’ve run the numbers, checked the accredited investor thresholds, and set your financial goals—that’s a great starting point. Or maybe you’ve heard about the benefits of multifamily investing from a friend or colleague.
To help, this blog breaks down everything you need to know about how to analyze multifamily opportunities. Plus, we’ll examine a real estate group with a track record of helping busy physicians achieve their financial dreams through multifamily investment.
A Checklist to Finding Multifamily Real Estate Deals
Consider the points below when considering multifamily investment properties.
Location Factors
The location should be at the top of the list when contemplating multifamily deals.
Choosing the right location means reviewing many factors that contribute to the value and future value of the asset. Some of the factors you must include in your assessment are:
- Population growth: Positive population trends can lead to higher returns and better vacancy rates in the future. Much of this data is available on the U.S. Census website.
- Age distribution: Is it a younger working city like a tech hub or an aging population with retirees?
- Access to amenities: Are there school zones in the area? Remember that families make good long-term renters as they will likely stay in properties for their child’s education.
- Job creation: Are there head offices or proposed plans for large-scale developments in the area?
- Transport: Don’t forget to check the connections, public transport options, and overall accessibility of the location.
- Internal migration: How many people are moving from other cities to this one? Why?
While most multifamily properties won’t check all of these boxes in the right way, a solid investment opportunity must show positive marks for most of these location characteristics.
Vacancy Rates
Past vacancy rates are a good indicator of the overall desirability of a property. After all, low vacancy means higher profits. However, remember that not all high vacancy rates are caused by location. The high vacancy can be due to mismanagement, poor living conditions, too high a rental rate, or outdated features.
Vacancy rates can be assessed during the underwriting process when addressing the rent roll, which includes details on the tenants, payment history, security deposits, and more.
If the vacancy rate is relatively high, remember that upgrades, better management, and newer amenities can boost the numbers. For example, at Viking Capital, part of our strategy includes investing in value-add opportunities to increase vacancy and rental income.
The Condition of the Property
Researching the property’s condition will give you a better understanding of the price and future expenditure required to maintain it.
Some starting points include:
- Age of the roof
- State and age of appliances
- Foundation
- Plumbing
- Electricals
- Hot water system
The older the property and the more wear and tear, the greater the startup expenditure to create longer-term value. A property condition report can show you the capital expenses required to manage the property.
Value-Add Potential
Value add investing is a smart strategy to increase the property’s overall value once purchased. Some common areas where value can be added to the assets include:
- Renovations to the apartments
- Amenity upgrades, property features, and smart-tech updates to stay on top of maintenance emergencies
- Upgrades to common areas such as swimming pool or landscaping
In this step, search for any upgrades that will increase appreciation and justify rent increases.
Number of Units
When assessing the number of units, remember that it’s not only about the units as a whole but the number of occupants in one individual unit.
A duplex is a good starting point if you’re a beginner investor and want to start small and learn about the world of multifamily real estate investing. In this case, you’d be an owner-occupier if you opted to live on the property.
However, suppose you want higher returns or may not have the time to manage a property. In that case, a real estate syndication managed by a multifamily investment property company can be a better way to enjoy passive returns, less work, and more income.
Forecasted Income
Crunching the numbers and forecasting income is necessary. Property valuations and rental forecasting can be done in several different ways.
One of the more straightforward methods is to take projected annual income from gross rent and divide it by the property’s purchase price, which will give you a cap rate. When forecasting, it’s better to be conservative and account for unexpected costs, upgrades, and more.
Take a look at similar buildings in the area, reach out to property management groups or use a free online calculator to assist with the rental range
The Track Record of the Sellers
Conduct a background check on the previous property owner or management company. Are they reputable sellers likely to turn over a well-cared-for property that will continue generating income?
- Search online databases and ask around
- What is the seller’s motivation? Why are they selling?
- What changes have they instituted while in possession of the property?
- What is the overall view of the residents?
Dodgy sellers may be trying to offload an underperforming asset with high vacancy.
Consider an Investment Group Like Viking Capital
Researching, purchasing, and managing a multifamily real estate asset can be like working a second full-time job. For many investors at the higher end of the income bracket, undertaking such a large-scale project is not feasible.
However, real estate investors don’t have to do this due diligence when a company like Viking Capital does it for them. Investing through multifamily investment companies is the smart way to build a multifamily real estate portfolio without taking away precious time you’d rather spend with your family or doing things you love.
At Viking Capital, we understand the pressures and frustrations of careers as high-level physicians. However, we also understand that many investors want to make their money work for them without taking on such a monumental task and getting bogged down in the day-to-day operations of multifamily real estate management.
We provide investment opportunities in highly researched multifamily real estate assets. We’ve acquired over $740 million in acquisitions with a proven strategy to create generational wealth for our investors.
Researching Multifamily Investment Properties is Tough (but Necessary)
Diving head-first into a multifamily real estate deal as a solo investor can be a huge move. In addition, the amount of research, multifactored analysis, and time required is off-putting for many would-be investors and physicians looking for the ideal way to create more generational wealth.
For this reason, doctors and high-level business professionals trust Viking Capital with their multifamily real estate investment dollars. If you’re ready to learn how multifamily investment companies can help you access high-level deals while you continue to work and do the things you love, reach out to the team at Viking Capital today.
