4 Ways to Find the Best Multifamily Deals
H ere’s a trick that successful mul- tifamily real estate investors are using more and more frequently— they’re forgetting the top 25 MSAs. Why? Because smaller, emerging markets are often where you find the best real estate investments. This seems counterintuitive, because most people want to buy in a boomtown. So borrowers line up to spend money on every high-rise apartment or multi-use develop- ment they can find. That’s what the buzz indicates, at least. But that is not the only way to make money in real estate. At Lima One Capital, we see that many successful investors find much better deals and profit in markets that are smaller and emerging. For example, we’ve seen investors suc- ceed on multifamily investments in secondary and tertiary MSAs like Akron, Ohio, and Texarkana, Texas. Let us share four keys that our investors use to find opportunities. by DanaWasson, Lima One Capital 1. Real estate works in cy- cles, which means a good investment can turn bad in a down economy. However, multifamily investments in workforce housing tend to weather economic downturns better because of the contin- ued need for affordable rents.
These rents remain attractive to people who choose safety and location over high-dollar amenities. In fact, this market grows in a downtown, because some people who have been living the high life in Class A housing need to downsize. 2. There is less competition from new multi-family stock in the Class B and Class C property types. People like shiny objects, and real estate investors are no different. Metro areas that build more and more Class A housing leave a gap that multifamily investors can fill by stabilizing Class B or Class C proper- ties or doing value-add rehab projects. These properties can maintain strong rent rolls and low vacancy rates—which sets investors up for success. 3. Many of the smaller metros have solid opportunities just waiting to be uncovered. An investor with local knowledge can find properties with great potential in smaller markets— or even in specific smaller areas of those markets. While bigger investors watch macro trends, local-knowledge fo- cused investors can find deals
most others miss.
4. The market favors multifamily housing, especially in smaller metro areas. Latest US Census data shows the number of people owning homes is hovering na- tionwide at about 64 percent, and rental vacancy is about 7 percent. Meanwhile, the median rental rate has risen from just over to $700 per month to $1,000 per month in the last 10 years. Home ownership rates per market tend to fluctuate, but the rental market remains strong. Finding areas with low vacancy rates and in- creasing rents will let you draw a target around properties that have potential. Even if these properties need some value-add rehab, they can become the kind of profitable deals that investors love. The Lima One Capital Multifam- ily program offers investors both a value-add rehab and stabilized option for their multifamily proper- ties. Learn more about multifamily property loans from Lima One Cap- ital at limaone.com/multifamily/. •
DanaWasson is Director of National Sales at Lima One Capital.
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