How to Choose Which Multifamily Property to Invest in and When

How to Choose Which Multifamily Property to Invest in and When

Investing in a multifamily property requires more forethought and planning compared to casual real estate browsing. The preparation involved consists of multiple variables a potential owner may consider in order to create an income stream. Limiting the risks of purchasing a multifamily listing demands research on recent statistics as well as the numerical data of the desired properties. This article outlines the variables that factor into a real estate investor’s decision including the basic property characteristics, the value of a property, and how to choose the timing of the investment. Whether starting out as a first-time or experienced investor, learn more how Calgary Multifamily can maximize your revenue through their property management services (click here). 

When searching for a desirable investment property, it is important to see what the building has to offer. These characteristics can include location as well as the total number of units. Gaining a building in a prime location is bound to increase the amount of potential tenants therefore increasing the return of investment (ROI). Choosing a particular location is also a defining feature in who the target tenant audience will be and can help you refine your marketing to those demographics. Another basic feature is the total number of units, as well as number of rooms in each unit, which influences the amount of revenue and risk. For beginner investors, they should focus on a duplex (2 units), triplex (3 units), or fourplex (four units). The reason for this is because these buildings have a lower risk compared to larger multifamily listings. In general, the basic characteristics of the property itself has an immense impact on the desirability of a building and should be reviewed in length before making an offer. 

When purchasing a multifamily property, it is crucial that buyers compare data points that reveal the true value of the property. These statistics include the estimated income and total expenses. Calculating the income a property can accrue is vital in determining the value of the investment and is necessary to conduct a cost-benefit analysis to establish whether the investment will pay off. To simplify this process, there are sites available that can verify the rental prices of buildings along with the estimated total income. Costs are another large numerical factor which can differ in each situation. For example, owners who are planning on living in one of the units may be eligible for owner-occupied financing options. Expenses are also impacted by one's credit score, debt to income ratio, and down payment as these are all components considered by lenders. To generalize, multifamily investors must have a whole and accurate prediction of the property value and must weigh the cost and benefits of their potential investment. 

Lastly, it is important that investors identify market trends. These trends can help an investor understand statistics in the past, as well as predict what may occur in the future. Accurate estimates provide investors the knowledge of whether to make an investment quickly or hold off. Relevant market trends divulge the actions of sellers, other buyers, and consumers (potential tenants). Examples include consumer spending habits, mortgage rates, unemployment rates, as well as average property sale prices. It is important to understand the actions of stakeholders, and future stakeholders, when investing a property. To summarize, accurately researching and predicting market trends can communicate to (future) property owners the best time to invest in multifamily buildings to maximize their revenue stream. 

There are many considerations that must be given thought and research when choosing which multifamily property to invest in such as the property’s features and value. Furthermore there are multiple trends that are necessary in deciding when to invest. All of these factors, when explored accurately, can limit the risks of a property and increase the revenue. As a multifamily investor there is much more preparation needed when considering a listing in comparison to purchasing a single family home. 

Once an investment property is attained it requires proper property management to further maximize the income stream, learn more about managing a property here. If you’re searching for professional advice contact Kamil Lalji, an established real estate agent with over 17 years of real estate experience.
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