Diversifying your investment portfolio can include adding a variety of different types of commercial real estate properties. Many investors tend to favor high end office buildings or retail sector holdings, but there is a case to be made for adding multifamily apartment buildings and condos. As with any type of commercial property, there are a variety of factors to consider when investing in multifamily properties.
Investors have the option of taking on a hands-on or hands-off approach to both investing and managing the property. Ideally, investors will choose the level of research and ongoing participation in the property management that is comfortable for their lifestyle, interests, and knowledge about this valuable income-generating asset.
Location, Location, Location
In all commercial real estate investments, location is critical. However, the specifics for multifamily real estate is unique and requires a particular understanding of the tenant profile and the surrounding community. For example, a luxury condo that appeals to empty-nesters and those close to or in retirement can be located outside of the downtown area. However, the downtown area is a key factor to attract the younger, single professional embarking on the first stage of his or her career. Proximity to schools, shopping, parks, open space, and cultural and entertainment areas contributes to high growth areas, which also means higher yield per square foot for newer or renovated buildings. Issues such as safety, crime rate, and even the surrounding neighborhoods all add or detract from the building and should be factored into the purchase.
Build the Experience and Knowledge
One of the benefits of multifamily investment is the option to start small. Investors new to this type of investment can work with a real estate professional to discuss the options and put together the deal. In most cases, the investor will need a property manager to assume the day-to-day responsibilities and to maximize the occupancy of the building. Starting small and building knowledge and experience allows the investor to learn the ropes and to add larger multifamily investments over time. The larger buildings are typically owned by groups of investors. Having a solid foundation of knowledge helps to determine which of these large investments are financially sound decisions.
Retaining the Value
Staying current in designs and trends in multifamily buildings is critical. So is ensuring the property is maintained both on the interior as well as on the exterior. Knowing how to manage the budget on the building to produce an income while making improvements and upgrades is an additional skill set building owners need to develop. While a building owner may never directly oversee these upgrades and improvements, knowing what needs to be done to keep a building in top shape is essential. This allows the investor to evaluate the property management company and ensure the building is effectively maintained to protect your investment.
