Investing in
Multifamily Properties

When considering various investment options in today’s financial world, many investors prefer investing in MultiFamily Properties, especially those who are looking for an additional source of income every month.

Investors who look for slow and steady capital growth in the equity value of their portfolio, as well as recurring monthly cash flow, generally opt for this investment strategy.

When compared with investments in other residential properties such as: single family homes, duplexes, four-plex, etc., multifamily properties are generally easier to finance, compound returns, and profits more rapidly given the sheer economies of scale.

Multifamily Homes vs. Other Properties

When it comes to residential real estate, there are two main types of properties that one can invest in: single-family (including duplex, four-plex, etc.) and multifamily. Both single family and multifamily are popular ways to invest in real estate by owning an assortment of rental properties.

Properties that only have one residential rental unit are commonly referred to as single-family properties, while apartments or the complexes that have multiple rental units are known as multifamily properties.

It can be rewarding to be a landlord. Apartment vacancies and interest rates have remained low over the years and are still expected to remain low over the coming years. Mortgage bankers are not the only professionals to benefit from multifamily housing. According to a survey by the National Real Estate Investor, multifamily real estate was ranked as the most attractive type of commercial real estate investment, and we agree.

Benefits of Investing in Multifamily Property

Typically, there are fewer regulatory and zoning hurdles when building a portfolio of small homes when compared with multifamily. However, the additional effort for multifamily can pay off as there are numerous advantages to capitalizing and investing in larger multifamily residential communities. Some of them are:

financing-multifamily

Easier to Finance

In most cases, the cost of acquiring an apartment complex will be higher than the cost of purchasing a single-family home as an investment. Consequently, it might appear that securing a loan for a single-family property would be easier and more relaxed on the underwriting, but the truth is the opposite. A multifamily property is more likely to be accepted by a bank for a loan than a single property. It takes a bank underwriter the same amount of time to review a larger, multifamily loan as it does for a single-family purchase. Additionally, the multifamily real estate asset is expected to generate a larger cash flow every month, which is beneficial towards debt. This makes it a less risky investment for lending institutions.

Less Time To Grow

Multifamily properties have become a suitable choice for property investors who desire to accumulate a relatively large portfolio of rental units. Acquiring numerous apartment units (say 20) is quicker and more time-efficient than buying 20 different single-family homes. As in the latter case, one will need to work with 20 different sellers and conduct inquiries on 20 houses that might be located at different locations. All these overwhelming tasks can be avoided by acquiring one multifamily property purchase of 20-units.

multi family home investment in Texas
Property manager

Property Management

A Property Manager is normally paid a percentage of the monthly income that a property generates for performing the duties like finding and screening tenants, collecting rent payments, paying bills, preparing financial and property reports, handling evictions, and maintaining the property. Many investors who own small properties or single-family homes do not have the ability of contracting an external manager as it would not be a financially viable decision due to their smaller portfolio. The amount of money that multifamily properties yield each month give their owners a portfolio of cash flow to pay for the much-needed professional property management services that are generally not available in a single-family investment.

There are many benefits related to owning a multifamily real estate property. They include access to easier and better financing occasions, the ability to rapidly grow one’s rental property portfolio, and the benefits of hiring a professional property manager.

Tips for Investing in Multifamily Homes

The MarketSpace Capital Due Diligence checklist is rather lengthy, so the following checklist can assist those who are looking to invest in a multifamily investment property:

Location

Location becomes the most desired criteria for tenants and renters: An investor should focus on high-growth, high-yield areas where properties are in high demand and have a well-maintained neighborhood.

Number of units

The total number of units on the property also becomes an important point of consideration for the investors due to the economies of scale.

Financial audit

The forecasted income and property cash flow are important considerations before investing in a property to understand the return on the investment.

MarketSpace Capital is available to assist you every step of the way with our goal of maximizing the returns and minimizing the risk in your investment.

Facts About Multifamily Real Estate Investing

We will discuss reasons why multifamily assets will continue to be attractive in the coming years.

Banks provide more debt capital for apartments, allowing them to get approved for mortgage loans than other property types quickly. Mortgage Bankers Association annual report indicates that in 2018 multifamily bank lending increased to $ 100 billion. Government-sponsored enterprises, Freddie Mac and Fannie Mac, have provided a liquid loan market encouraging easy buying and selling of multifamily housing.

Multifamily housing has a significant advantage from the lenders’ side since its rental income comes from a wide range of tenants making multifamily investment lending a lower-risk proposition.

  1. The cash flow of multifamily projects over the 5years, according to the NCREIF Property Index, is 8.58%, a desirable rate for a dividend stock. Most investors will aim for above-average returns like we do at MarketSpace Capital.

Despite the economy’s state, people will always need a roof over their heads, and multifamily housing has been regarded the best according to tenants’ demand. The Federal Reserve Bank of St. Louis report that homeownership dropped in the 1970s and 1980s in the United States.

Multifamily housing developers have given families more reasons to consider multifamily real estate since apartment construction is quality. Buildings are made more sustainably with a focus on green space and entertainment options. Designs provide a modern lifestyle, joining technology with service orientation adjusted to the customer experience.

Demand is strong for older Class C and Class B multifamily housing, such as our first Orlando, Florida investment. Owners look for private equity real estate partners to offer capital for value- add renovations. These buildings are a profitable investment since they are efficiently managed without significant renovations. Communities offer subsidies to owners who house median-income tenants like the police or teachers.

Property enhancements and capital improvements can have immediate payback, for they can command higher rents. For example, tenants will be willing to pay more if they are provided with something they value, like in–unit smart home technologies such as Nest cameras, thermostats, and package locker systems.

Property enhancements and capital improvements can have immediate payback, for they can command higher rents. For example, tenants will be willing to pay more if they are provided with something they value, like in–unit smart home technologies such as Nest cameras, thermostats, and package locker systems.

The advantages above are fundamental and essential to a multifamily property.

At MarketSpace Capital, we offer additional strategies to ensure our multifamily buildings are a better way for a real estate investment.

Invest in Multifamily Homes with MarketSpace Capital – Located in Texas

MarketSpace Capital, located in Houston, Texas, develops best-in-class multifamily projects in some of the most attractive real estate markets in the United States.

MarketSpace and its senior leadership team are available to provide answers to the questions arising from many first-time real estate investors such as, “How do I make money on real estate?”  MarketSpace Capital is there to help the investors in understanding the concepts of Cash-on-Cash Return, Internal Rate of Return, Equity Appreciation, Principal Pay Down, etc.

MarketSpace Capital also assists investors in understanding the unique tax and estate planning benefits that multifamily investing can provide. Simply put, MarketSpace Capital is here to provide friendly guidance and help throughout the process of investing in a multifamily property.

MarketSpace Capital is a private equity firm located in Texas that specialized in multifamily home and commercial real estate investing.

Frequently asked questions

When you purchase a single family home you may pick up 1 condo unit or a house. Whereas in multifamily you are purchasing a whole block or complex/building.

There are quite a few ways to find multifamily homes for sale around you. From your local real estate listings, to auctions and working with real estate agents. You can even invest with private equity firms.

Multifamily properties tend to bring in more cashflow vs single-family homes. This is why they are oftentimes a more popular choice for investments.

While each property may vary when it comes to maintenance cost, a good rule of thumb is to keep aside 2% of the properties value on hand for maintenance needs. For example, if the property you own is worth 10 million, the maintenance cost would be $200,000. 

There are different financing options available for commercial properties based on your needs. Some examples are FHA loans, bank loans, bridge loans and CMBS loans. You can also invest with private equity companies such as MarketSpace Capital that specialize in multi-family home investing.

Demand is strong for older Class C and Class B multifamily housing, such as our first Orlando, Florida investment. Owners look for private equity real estate partners to offer capital for value- add renovations. These buildings are a profitable investment since they are efficiently managed without significant renovations. Communities offer subsidies to owners who house median-income tenants like the police or teachers.

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MarketSpace Capital, LLC is a Houston, Texas-based private equity real estate development firm focused on ground up developments and value-add investments throughout the United States.

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