Healthy cash flow is every multifamily investor’s objective.
Building wealth is the main reason why they’re in business in the first place, at which point, investors will need to use the right methods for securing better profitability.
For this week, let’s talk about the best investment strategies to use and how you can generate the best results for your bottom line!
First-time investors get easily overwhelmed when it comes to financing the acquisition of an apartment complex. Such a property already makes for a costly investment, which means you will have to raise a large amount of money to afford it.
There are several ways you can do this:
1. Self-directed IRAs
Self-directed IRAs are great for commercial real estate investing. You can ask friends and family members to pool their IRA funds together and purchase a multifamily property that generates cash flow in the form of equity shares.
2. Hard money loans
Applying for loans remains to be an effective way to access funds you can use to purchase a property. You just have to look for a lender that offers reasonably priced rates, especially for properties in need of improvements.
3. Choose a direct lender
Why get a loan broker to help you with your financing needs when it’s more practical to work directly with a lender? This proves to be less costly since you won’t be paying additional fees for securing the right loan product.
Shopping for a Multifamily Property
When you’re looking around for a great investment property, start your search in markets that have consistent rent growth. Here’s a good list of the top 100 markets with the highest rents from Investors’ Business Daily:
However, first-time investors will have to be extra cautious when searching for emerging markets. High rents are just one of many factors that affecting cash flow, which also means that there are added risks for investors to consider.
As a general rule, opt to start out small. You might want to find a property that won’t entail too much of a loss on your part, so anything that’s less than 10 units is considered a safe investment. The trick here is to be aware of your own limitations and not let emotions inform your decision in purchasing a multifamily asset.
Effective Property Management
Property management is crucial to maintaining healthy cash flow. Improving the experience of your tenants raises their satisfaction and, hence, keeps your vacancy rate low.
Effective property management comes in many different forms:
Warm client relations:
Make sure you forge healthy relationships with your clients by keeping your property managers open to concerns and questions.
Make sure you align the property with the lifestyles of your tenants. Consider improvements along the lines of fitness centers, pet-friendly facilities, and co-working spaces for freelancers.
Prompt repairs and improvements:
Keep constant tabs on the condition of the property. The slightest issues can turn off potential clients, so make sure you repair any leaks and other structural issues that could decrease the property’s value and make it harder for you to sell to potential renters.
Using the right strategies will help you achieve better cash flow. If you want more tips on how you can build your commercial real estate investment portfolio, Estatserve is here to give everything you need! Contact us to learn more!
As informed investors we should understand the risks associated with real estate investing and that there is no guarantee. Please do your due diligence.
Stay tuned for other great tips!
What are the best investment strategies to generate wealth?
- Self-directed IRAs
- Hard money loans
- Choose a direct lender
2. Shopping for a Multifamily Property
3. Effective Property Management
What are the forms of effective property management?
- Warm client relations
- Additional amenities
- Prompt repairs and improvements
How can I reduce my property management costs?
You can reduce your property management costs by renegotiating your management contract, outsourcing maintenance and repairs, and installing energy-efficient appliances.
Should I invest in a property with low rents?
Investing in a property with low rents can be a good opportunity if you believe that you can increase rents over time. However, it’s important to conduct thorough research to ensure that the property is located in an area with high demand.