Five Things You Should Know Before Investing In Multifamily

As a multifamily broker, I’m asked a lot of questions by first-time investors. Here are five things every new investor should know before getting started with multifamily properties.

1. Don’t confuse where you would live personally with where you should invest in apartments.

It’s not about what feels comfortable to you — it’s about the quality of housing you can provide the market and at what rate that determines whether or not it’s a good investment. Too many people new to investing in apartments say, “But I wouldn’t want to live here.” My response is usually, “That has nothing to do with it. What matters is who would want to live here?”

2. Find upside in rents.

It’s not all about the current rent price. Sometimes a unit is very outdated and simple renovations (kitchen cabinet replacement, new appliances, new tile in the bathroom) can have a significant impact on rent. Other times, the building is in good shape but owned by the same landlord for 30 years who never wanted to make waves (if they have long-term tenants, that’s a tell-tale sign their rents are too low). Look at the investment for what you can turn it into — not necessarily what it currently is. There are lots of new tools out there for helping investors determine optimal rent. I’m an investor in Enodo, an algorithm created to determine not only optimal rent but also the incremental rent you can charge for each individual improvement to the building or unit.

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