Location & Economy
A huge hardship when dealing with multiple properties is that they are rarely located near each other. But by investing in multi unit real estate, you have a couple hundred units in one, centralized location as opposed to stretched out over a huge area or potentially a couple of cities. Having all of your units in one area could be incredibly beneficial. Especially if you are managing properties from any distance at all. And if you are self managing, having the ability to manage tenants is a greatadvantage.
There is also a great advantage when it comes to the maintenance of keeping up property. There are certain services that you have to provide regardless of if it is one house or 100 apartments, such as maintenance, landscaping, repairs, etc. And those services that should become less expensive on a per-unit basis. You also have a much better option to negotiate for those services. The economy of scale is a major draw for real estate investors.
But more importantly, multi-family investing is about the market and finding the right kind of cash flowing assets. One of the things that you are primarily looking at is what class the property falls into. The classifications are based on their risk, return, and the ability to bring rental income at premiums with capital improvement efforts. They are normally labeled as A, B, B+, B- or C properties. A properties being the highest quality and value in their market and C properties are normally qualified by being more than 20 years old and in less desirable areas of town.
Financing
When you invest as a single family home investor, you normally acquire a mortgage based on your personal net worth and your credit history. This isn’t always a bad thing, but it can be a challenge when it comes to growing your portfolio. You will only be able to get so many mortgages no matter how successful you are at investing. But when it comes to multi family investing, you have the ability to prove your success based on financial performance and cash flow. Additionally, investing in multi family takes several private equity investors that come in to the deal to make the transaction possible. As you build up your financial experience and assets that help you get the return on your investments, you will continue to see the benefits and why pursuing multi-family is a consideration many other investors are making.
There is a lot of safety in joining a syndication as it holds the legal structure to document how and what investors want to invest, what kind of exit strategies may be necessary, the amount of return the property will potentially yield, roles of managing members, roles of equity and debt investors. This process is legally written up by a Real Estate syndication attorney and is therefore ironclad when it comes to the allocation, movement, and management of your investment.
At Magnolia, our goal is to form a relationship with potential accredited investors so we can understand and work with their financial investment goals and they can find out about the types of markets and properties we are working on to acquire. Making the decision to invest in multi family units is a lot to consider. If you are already investing, you may have to make decisions about your current properties. If you haven’t started to invest yet, this may be a much easier decision. Regardless of where you are in the investment journey, we would love to come along side you as you transition into multi family investing. If you are interested in multi family investing, please leave us your contact information and one of our acquisition team members will get back with you quickly.
