3 Common Investment Strategies to Purchase Multi-Family Property
July 3rd, 2021
Choosing commercial real estate investing as an avenue to build wealth is a smart move. It also requires learning and using different strategies like thinking outside of the box to get the best deals for your investment dollars. Utilizing the services of an experienced and helpful broker sets the tone for future success when looking to purchase a multi-family property.
3 Investment Strategies to Buy Your Multi-Family Property
Consider these proven strategies to build your multi-family property investment portfolio:
- Value-Add (BRRRR): This strategy seems to be the most commonly used by investors. True to the acronym, you will:
- Buy a property that could primarily use some cosmetic updates.
- Rehabilitate the buildings and units. You may apply some paint and spruce up the space or completely renovate it. Focus on those areas that tenants find the most valuable.
- Rent out the apartments at higher rates. Again, hiring a leasing and management team can be vital in getting the return you hoped.
- Refinance the commercial loan after stabilizing your asset with around 85% to 90% occupancy. At this point, you should have added significant value to the property and raised your net operating investment (NOI).
- Repeat the process and grow your portfolio.
- Opportunistic: This strategy is very hands-on and requires some patience. While the risk is on the high side, so are the rewards. Generally, cash flow is not the most significant concern as the success of this strategy lies in the sale or refinance of the investment real estate. You might see:
- Heavy Value-Add opportunities require significant renovations where the property tends to be older and may be completely vacant.
- Land Assemblage revolves around assembling multiple parcels of real estate into one tract. Developers see these tracts for significant development projects.
- Land Banking is using your land as your bank. That is, you use your capital to purchase property instead of depositing it into a bank. As a result, there is very little or no income until you sell the land at a higher value than you bought it.
- Land Development means investing in a property and envisioning a new way to use it. The land can be either developed or untouched.
- Core: On the opposite side of the investment spectrum is a strategy that focuses on purchasing highly stable yet low-risk assets. These subcategories clarify these pristine properties:
- Core Plus is a hybrid of core and value-add. Investors will find that less risky properties may still need some cosmetic improvements or a better property management or leasing team.
- Stabilized Assets include real estate that is fully occupied and requires very little work. The returns can be low on these properties.
- Trophy Assets are comprised of those buildings and properties with the best locations, high visibility, and easy access.
Partner with Experienced Multi-Family Property Brokers – The Estes Group
Choose to partner with a multi-family real estate broker who has the experience you need to find suitable properties for your financial goals. The Estes Group serves clients throughout the southern gulf states. We believe in an investor-focused approach to assisting you. If you want a company that keeps your best interests in mind, look to us. We help customers purchase multi-family property gems in Alabama, Mississippi, Tennessee, and Louisiana. Contact us today!
Call us at 601-362-9633 or contact us online to discuss your real estate goals with our knowledgeable and experienced investment property brokers. We’ll help with multi-family property purchases so you can reach your financial goals.