STRATEGY
MULTIFAMILY INVESTING
Five Steps to Smart Multifamily Investments THE CONTINUED RISE OF RENTERS MAKE MULTIFAMILY PROPERTIES EXCELLENT INVESTMENTS.
2nd Annual MIDDLE-MARKET MULTIFAMILY FORUM (Northeast) February 7-8, 2019 New York, NY
by Swapnil Agarwal
H
millennials. For one thing, they are generally located in established middle-income neighborhoods. In addition, these apartment complex- es are essentially recession-proof, which is important for tenant reten- tion when the economy heads south. GREATER LONG-TERM RETURNS Older complexes are often under- valued or overlooked by institutional buyers due to the significant invest- ment in time and resources required to reposition the property. A smart investor will see the opportunity here, since by investing in the right kinds of upgrades and addressing maintenance and safety issues, these buildings can yield greater returns, significant NOI growth and overall capital appreciation. > Continued on :: PG 81 NO. 4 LOWER INITIAL COSTS LEAD TO
omeownership rates have fallen in recent years due to
due to student debt or the delay in starting a family, this large segment of the population is a big factor in the increasing demand for apart- ments nationwide. IN QUESTION In response to the growing number of people who prefer to rent rather than buy a home, new, shiny apart- ment communities are being built in cities across the nation. However, a survey done by RealPage found that retention rates for these newer, up- scale buildings tend to be low, with less than half of the tenants opting to stay when their lease expires. Such turnover results in high expenditures for unit make-ready and marketing in order to attract new tenants. In short, net operating income is low if vacancies are high. NO. 2 AGE OF THE COMPLEX FOR CLASS B AND C APARTMENTS With minimal investment in upgrades and amenities, the older Class B and C complexes can attract a wide demographic, includ- ing working-class individuals and NO. 3 INCREASED DEMAND FACTOR
rising home values and stricter un- derwriting standards. As a result of this and the increase in the number of people 34 years of age and young- er, the prime age range for rentals, more U.S. households are renting than at any point in 50 years, ac- cording to the Pew Research Center. The signs all point to an excel- lent opportunity for investment in multifamily rental properties. While the overall outlook may be favor- able, however, not every multifamily investment is the right multifamily investment. Investors must dig a bit deeper to find the most profitable properties for long-term invest- ment. Here are five things to consid- er before you make a decision on a multifamily investment opportunity: Who are the renters? Work- ing-class individuals have tradition- ally been a mainstay of apartment living, but we now have to consider the millennial generation, consist- ing of 85 million U.S. citizens born between 1977 and 1996. Whether NO. 1 MARKET GROWTH FACTORS
A Forum for Small & Mid-Sized Apartment Owners & Developers
Swapnil Agarwal is CEO of Nitya Capital and its property management arm, Karya Property Management. Five years from start-up, the company grew from
one apartment building to more than 15,000 units in Houston, Dallas, San Antonio, and Austin, has more than $1 billion in assets under management, and has 300 investors and 350 employees.
38 | think realty housing news report :: february / march 2019
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