How to Pick Commercial Multifamily Real Estate Investments

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Multifamily properties are real estate that are not considered single family homes. These are apartment complexes, duplexes, townhomes, and condominiums that have multiple units that can be occupied by renters.

Investors may take interest in multifamily real estate because of its cash flow, scalability, and the opportunity to diversify their portfolio.

However, in order to be successful, an investor needs to carefully evaluate the property first. There are several factors that need to be taken into account when evaluating a prospective multifamily real estate investment.

If you are interested in exploring multifamily investing and multifamily syndication, you need to know what to look for in a property or deal. With the right deal, you can boost your income while maintaining a passive investment approach.

Why Invest in a Multifamily Property?

If a residential property contains more than one housing unit, then it is considered a multifamily property. Also known as a multi-dwelling unit (MDU), each unit has its own iving space, including a separate kitchen, and a bathroom. For investors who want to diversify their portfolio, this can be a solid option. It can serve as a great wealth-building tool no matter how you choose to invest in it. [1]

Compared to single-family properties, multifamily properties tend to be more expensive but they come with an array of benefits for investors. For example, apartment complexes and condominiums tend to bring a larger and more consistent cash flow because they have multiple tenants and fewer vacancies at any given time.

Thanks to fewer vacancies, there is less risk involved in this type of investment. There is a larger pool of tenants to provide consistent cash flow, whereas a single-family unit that becomes vacant will produce zero cash flow until someone moves in.

Since multifamily properties are comprised of more units, there are multiple streams of income. This means as an investment, it is valued higher than single-family properties. [1]

It is not always necessary to purchase the multifamily property by yourself. A multifamily syndication is a type of real estate investment wherein multiple investors pool their money in order to purchase an asset. Any type of real estate property can be used for a syndication deal but multifamily syndication is the most popular because it is a low-risk investment.

In exchange for equity in the multifamily property, passive investors provide most of the capital required. A syndicator looks for a multifamily property, sets up the deal, and then looks for investors to partner in the syndication. [2]

How to Choose a Multifamily Property to Invest In

If you are not participating in a syndication deal, multifamily real estate investing can be expensive since they are bigger than single-family units. Multifamily properties require more capital, and are often held to strict regulatory standards by local jurisdictions. This only means you need to be very smart about where you are putting your money in.

As an investor, you need to put in your due diligence. You want to see the documents, maintenance records, bank statements, utility bills, etc. This will help you ensure that the investment will actually work for you. Consider factors such as amenities, local crime rate, and proximity to schools, hospitals, shopping centers, parks, etc. [3]

Due diligence involves locating a property below market value and assessing its financial sensibility. After locating a potential property for your investment, you should compare purchase prices, rental estimates, short-term costs, and long-term costs. The numbers will have to be your primary concern because these figures will help you understand the true value of the investment property. [1]

One of the most important factors when selecting an investment property is the location. When it comes to real estate investing, it’s all about location, location, location. You have to think about whether the property will appeal to renters because that will be your main source of income. Investors typically look for properties in well-maintained neighborhoods.

The number of units will also affect your potential income. With fewer units, there will be a smaller cash flow, but the property will likely be more affordable compared to a large condominium. Beginner investors should consider starting small. More experienced investors, especially accredited investors, can go for bigger investments without worry.

Another thing to keep in mind when investing in a multifamily property is that you will have to manage it. It’s not easy being a landlord, as you will have to deal with emergencies and taking care of the property itself. Some real estate investors hire a third party property manager to solve this problem. Some multifamily syndicators, such as The BAM Companies, is a vertically integrated company with an in-house management team. 

If you do decide to take on the role of landlord, make sure you are choosing a property that you want to take care of. You will have to be more involved with the property you are investing in.

This is another reason why some investors go for a multifamily syndication deal. The syndicator will be in charge of managing the property. Sometimes they will hire a property manager to take on the job. But either way, you won’t have to spend time dealing with tenants. This is truly a passive real estate investment.

Work with BAM Capital

For investors who want to explore multifamily real estate investing, there’s no need to go through all that hassle. You can work with BAM Capital and invest in high quality real estate opportunities that are sure to make you money.

BAM Capital works with accredited investors and negotiates the purchasing and financing of high quality multifamily real estate properties on their behalf. BAM Capital has a Midwest focus, and only goes for B++, A-, and A multifamily assets. This strategy provides low-risk investment opportunities with lucrative assets. Investors love the passive investment approach provided by BAM Capital. [4]

This Indianapolis-based company currently has $593M AUM and 5,000 units. Accredited investors reap the benefits of their cash flow-positive assets. Schedule a call with BAM Capital and invest today.

BAM Multifamily Growth & Income Fund II

BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.

  • Consistent passive income
    Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.
  • Significant tax benefits
    A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.
  • Vertically integrated company
    In-house property management and construction allow for predictable cost reduction and value add.
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