5 Multifamily Investment Strategies You Should Try

multifamily investment strategies

There are roughly 32 million multifamily homes in the United States. They make up nearly a quarter of Multifamily homes are a popular option for people looking for affordable housing options in this real estate market. They’re also attractive to older couples looking to downsize and live somewhere with less maintenance.

From an investment standpoint, multifamily homes present an opportunity to capitalize on a growing market. This is the chance to use multifamily investment strategies so you can make smart real estate investments.

How can you make sure that you’re using the right investment strategy for your multifamily investments? Keep reading to learn the top multifamily strategies and tips.

  1. Invest by Market

Investing by market is a simple real estate investment strategy. It’s hard to execute when you’re not familiar with all real estate markets.

This is a strategy to utilize when there’s a market downturn. That’s because there will be a few markets that shine while others struggle.

In the housing crisis of 2008, markets in Arizona and Nevada saw sharp drops, while markets like Kansas City were stable.

In a good market like this one, it seems like every market is a growing market. You’re better off investing in multifamily homes in your area than finding opportunities elsewhere.

Keep this multifamily strategy in your back pocket in case the market takes a dive.

  1. BRRRR

Buy-Rehab-Rent-Refinance-Repeat. This is one of the most common real estate investment strategies, and it works with multifamily properties.

The process starts by finding a multifamily investment property that you can add value to. These properties usually need a significant amount of renovations.

You’ll make the renovations, which should increase the rental value of the property. You’ll look for a property management company to handle the rental aspect of the property.

Once the property has stable occupancy rates and you raised the value of the property, you can refinance the loan.

That allows you to purchase another property and grow your real estate portfolio. The success of this strategy hinges on your ability to locate a good property.

If you don’t run the numbers correctly, you could end up losing money on the deal.

  1. Invest by Property Type

There are investors that prefer to invest in certain property types. They become experts in their niche and become more successful as a result.

That’s compared to investors who prefer to invest in different types of multifamily properties. There are major differences between a condo and affordable housing.

Failing to understand the nuances could cause you to lose money on the transaction.

Trends in housing show that mixed-use properties are gaining in popularity. These are properties that have retail space on the lower floors with apartments on top.

Age-restricted housing is growing in importance as the population continues to get older. By 2040, the population will need about a million more housing units for seniors.

  1. Real Estate Syndication

You might not be in a financial position to upgrade your portfolio to include multifamily investments. There are ways to upgrade your portfolio.

For instance, you could sell a single-family property and leverage a 1031 exchange to purchase a multifamily property.

A 1031 exchange is a complicated transaction. Multifamily syndication is a way to expand your portfolio and reduce your risk.

Syndication is a way to take a multifamily investment property and pool your resources with other investors. You own a percentage of the property and reduce your risk by working with other investors.

On the positive side, you get to invest in larger real estate deals without having to be the landlord. The syndicate takes care of the property management details.

Read the agreement carefully to understand how profits get distributed. Ask about the exit strategy for the property as well.

  1. Tenant Attraction and Retention

What is the secret to making multifamily investments deliver a return on investment? You have to show that your investment is occupied.

You need a strategy to attract and retain tenants. You’ll find that there are amenities that get people to sign a lease. A fitness center, community room, parking, laundry, and air conditioning are of interest to renters.

Once you get them in the door, focus on getting them to stay. Make sure all maintenance requests get handled in a timely fashion.

Social media is a factor in tenant retention. Create a Facebook page or group for tenants. That helps create community and makes it hard for people to leave.

Multifamily Investment Tips

Multifamily investments are high-risk transactions, so you need to make sure that you do your research before making an investment.

Research property prices in the area, rental rates, and typical tenant profiles in each location you want to invest in. That will give you an idea as to how you position your property.

For instance, if you see that a population skews older, then you can position your property as an age-restricted one. A college town would be great for student housing.

Create an investment budget. Create a budget not just for the initial investment, but to renovate and operate the property as well.

You can limit your risk by starting with small investments. A syndicate is one way to go, but if you want to handle the entire investment yourself, start with a duplex.

Investors start with a duplex and live in one half while renting out the other unit.

The Best Multifamily Investment Strategies

If you want to grow your real estate portfolio, you need to invest in multifamily properties. These properties range from condos to mixed-use properties.

You just learned the top multifamily investment strategies to ensure your investments are successful. Always do your research and learn about the local real estate market before making your investment.

Head over to the Real Estate section of this site for more real estate tips.

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