SHIP 30 FOR 30 SERIES
8 Things I’ve Learned From Investing in Multifamily Apartments
Several years ago, I scaled from investing in single-family houses to multifamily apartments.
These are the biggest lessons I’ve learned:
- Lower-class properties have better occupancy, stability, and ROI than higher-class properties.
- If you buy a property that is already cash flowing, there probably won’t be much growth. If you buy a property for growth, it probably isn’t yet cash flowing.
- The easiest and most effective strategy: Find a poorly managed property, and install a new management team.
- Find the “story” in P&L numbers. Is there too much turnover? Are maintenance costs too high? Are rents too far below market? These may be signs of poor management.
- Make sure your Property Manager has business relationships in the location you want to invest. If not, it will take up to six months to develop those relationships.
- Reverse engineer the buying process by having your Property Manager evaluate the property, and give their assessment.
- Property Manager lifecycle:
I. New PM comes to town. Hits the scene with a vengeance.
II. Word gets out to other investors in town.
III. Business grows exponentially. PM takes every new client.
IV. PM gets overwhelmed, spins out of control. Properties suffer.
V. Investors all leave. PM falls apart.
VI. New PM comes to town. Hits the scene with a vengeance.
- When you refinance, gather comps and present your research along with your opinion of what your property is worth. While this doesn’t guarantee they will use your opinion, it gives them somewhere to start and they will appreciate you doing the work for them.
This is an Atomic Essay from the Ship 30 for 30 daily writing challenge.