If you’ve been dabbling in real estate investing for a while now, you may be wondering if investing in apartment buildings would be a good option for you. Well, you’ve come to the right place. When we started out, we were investing in single family homes with the intention of flipping and selling them. We were interested in beautiful upgrades and stylish designs on houses that were in hot parts of town. But shortly after we embarked on that journey, we found a bend in the road, one that led us to multi-family properties. And here’s what we think are some things to consider if you want to invest in multi-family properties.
What is Your “Why”?
Regardless of how long you’ve been investing, you need to be absolutely sure that investing in an apartment building is right for you. Whether it’s to expand your portfolio or to change your investing style completely, make sure that you have a “why”. Transitioning from single family homes to multi-family requires a big leap in time and money. You will need to have not only the initial capital requirement, but also the ongoing cash flow to support a larger investment and you should make absolutely sure that your schedule and finances are capable of accommodating this shift.
Identify Your Sweet Spot
There is a huge difference in single family and multi-family investments. And these are the things that we think you need to be absolutely sure of before you try to dive in
- Apartment classifications: In the U.S., apartments are classified on a scale from “A” to “D”. “A” rated buildings are the cream of the crop, they are newer, in prime locations, they have excellent amenities, and are normally considered “high-end” or “luxury” apartments. “D” rated apartments are lower priced, older, and may require maintenance or renovations to pull in the kind of profit that you need.
- Construction details: At this point in time, after all of the renovation TV shows, everyone should know that renovation and construction always takes more time and money than originally quoted. It’s just a fact. But don’t let common construction problems scare you away. Instead, hire well known, reputable professionals and always have an emergency fund.
- Property Management: It may seem like a fun idea to “run” your own apartment complex. But the reality of the situation is that it is nothing like renting out a single family home. There are so many complex issues that come up in multi-family rentals, and you should get comfortable with hiring a property management company. They are well versed in how things run. And you will have far less of a headache if you let them pull together your property and handle all of the daily management.
Mind your Due Diligence
Before you jump into any deal, or even consider a deal, make sure to mind your due diligence. Run in depth analysis and make sure to investigate every aspect of the property. This is standard for any investment, but with commercial real estate, keep in mind that for every 150 properties that you are seriously interested in, you may get half way there with one.
Multi-family investing is often a long, hard road to walk. It takes time and patience. Unlike single family home investing, it takes a great amount of skill to land a deal. But if you start to walk out these few tips, you’ll see a return on the investment of your time as well as your monetary investment! If you’re looking to get into multi-family real estate investing, head to our contact page and leave your information. We are a syndicated, multi-family real estate company who deals with B & C Class properties and we are always looking for other investors who are looking to diversify their portfolio. Here are Magnolia Capital Properties, we work with one investors client, one property at a time!
