Investing in Multi-Family Housing
4 Things You Should Know…
What is Value Add Property?
Everyone is clamoring for a “value add” property. A value add property is a multi-tenant property that is not at 100% capacity. This provides an opportunity for an investor to purchase a property for a little less, fill the vacant space with additional tenants and increase their return on investment. The reason we get inquiries on value add properties is that it’s the best way to get a return on your investment however they’re not easily found. Investors purchasing apartment properties that are on the market are paying a premium.
What Challenges Could I Face?
There are some challenges with a multi-family investment vs. an office or industrial investment. If you can get a net deal from a multi-housing tenant, that is ideal. A net deal is being able to collect the base rent, the tenant pays for all of their utilities, and you can bill them for regular maintenance such as snow plowing. This is not always the case, however. More often you will bill the tenant first, then you have to figure out how to pay for other expenses. It’s more management intensive.
Should I Manage the Property Myself?
What’s important for a multi-housing investor especially if it’s a smaller property, is that it’s harder to manage, you may have to manage it yourself, and then you have to ask yourself “what kind of time investment will this be?” It’s easier to find a multi-housing tenant to fill a an empty unit vs. a company to fill an office or industrial space, but you need to be actively involved to manage it. If you want a professional service to manage the property for you and a leasing team to fill vacant space, you need to have more units in your portfolio.
Urban vs. Suburban
What suburban developers are finding with multi-housing is that there is a lot of demand for people to move into new apartments with great amenities. From an urban development perspective, they’re trying to find a way to not only have the residential units but to provide dedicated space for mixed use so that retail, restaurants and other lifestyle amenities are incorporated.