During the process of evaluating a multifamily property one of the most important things to take into consideration is the location of the property.
The location of the property is important because if the simple fact that if the area is in decline economically, there’s going to be few people who want to live there and you may have a difficult time keeping units occupied.
Thankfully, there are several things’ investors can do to research an area to determine if it’s the right location for investing in a multifamily property.
Research The Area Online
One of the great things about being a multifamily investor in the 2020’s is that you can easily research an area online before taking the steps to buy a property there.
Some of the websites that you can use for researching properties include:
One of the main sites you can use to research your potential home is Trulia.
You can look at homes for sale, as well as rentals. You can compare prices on different homes, and see what similar homes have sold for in recent months. Trulia also allows you to research the neighborhood the homes are in — which can be quite important.
If you are interested in reported crime stats and school reviews (and you should be), Trulia can help you out. You can look at these items, as well as read local reviews for different neighborhoods. Trulia allows you to receive alerts as well, letting you know when prices are cut, and when open houses are held.
Sperling’s Best Places
If you are trying to figure out where the best place to live might be, consider visiting Sperling’s Best Places.
You can compare a number of items including:
- Real estate
- Mortgage rates
- Cost of living
- Crime rates
All of this is helpful information when you are researching a homes in a specific city or neighborhood. If your living needs are flexible, this site can help you find the best place for you to live, and then you can begin your home search.
Another helpful web site for those researching a home is Home Fair.
Get information on schools, as well as vital statistics on cities. You can also use the salary calculator to determine what your salary is “worth” in a new place. You can also get helpful information using an array of calculators, including rent vs. buy, and moving calculators.
Make sure you take some time for research before you buy your home!
It costs money, but you can get specific information on properties you are searching for. You can compare different properties for $5, or get a property detail report on a specific property for $3.50. This is helpful information that can help you verify ownership, look at tax information, and find other important information about a property you are considering.
When you start to get serious about a couple of different properties, this can be a valuable resource.
Get local info on neighborhoods in your desired area, as well as find home values. You can research different schools and school districts, as well as communities.
RealEstate.com also drills down to neighborhood info, so it’s not just city information. The school information is also fairly detailed, including test score results, as well as reviews of the schools in question.
Consider How The Area Is Doing Economically
Even though you may have found a great multifamily property for sale, if the area is in decline economically, it would be best to steer clear of that property at least until the local economy improves.
Here are several online tools that you can use to research an area economically online:
Besides investigating how an area is doing economically, you should also investigate the social economics of an area as well. This is an important step in the process when researching an area because many cities have changed over the last year and different factors are affecting the safety and security of people who live in those areas.
One important thing to keep in mind when researching an area online is to make sure that the data, you’re viewing is current data and no more than 60 days old because you want to make sure you’re viewing accurate data for an area instead of data that was compiled more than 12 months ago.
What To Do when You Find A Rental Property That’s In A Great Location
After identifying a rental building that you’d like to buy, it’s time to analyze its location. Economic conditions and location play a significant role in determining the value of the rental asset, as well as your rate of return.
Make sure you know the market in which you’re buying. Do some research on your city of choice to understand its economy. Weigh in both the positive and negative, and asses if the city you’re buying in will ultimately increase your asset’s value over time and guarantee a strong cashflow. Furthermore, multifamily supply and demand also play a pivotal role on how you’re building will perform.
Next, analyze the submarket, whether in the form of a neighborhood or a zip code, to have a better understanding of local trends. Buying in an emerging submarket usually results in a winning investment, but without the proper knowledge of the area, it’s possible to buy something in a rougher neighborhood and even lose money on the investment.
Perform a Comparable Search
This straightforward step entails analyzing nearby rental buildings that are similar to yours in terms of the number of units, the square footage, and any other specifications, to see if their cap rate, value, rent and NOI are similar to your property of choice.
If the multifamily dwelling in which you want to invest is undervalued or has lower rents when compared to similar assets in the neighborhood, you might just be lucky and land yourself a great deal. Comparing properties can also let you know if the one you’re trying to buy is more expensive than those next door, saving you from a bad decision.
Go See the Property for Yourself!
If you’re seriously thinking of buying, go and check out the building for yourself. Examine everything from the grounds to apartments, common areas and so on. It also pays to do open visits of similar assets in order in order to compare rents, levels of upkeep, and other important factors.
Following these steps can help you develop a clearer understanding of a property’s worth, but make sure to also consult professional brokers, lawyers and tax experts if you decide on buying. As an investor, apart from understanding the marketplace, analyzing recent sales comps, and knowing how to identify and then properly evaluate a property, it’s imperative to know that the investment you’re making is wise and aligns with your financial goals.
Now is a great time to invest in multifamily properties, especially since demand for multifamily properties is only continuing to increase nationwide as more people are moving back to cities and urban areas after being gone for much of the last year due to COVID-19.
Multifamily real estate investment income is fueled by 9-to-18-month tenant leases, which provide a regular and dependable income stream that should produce positive cash flow higher than typical stock dividends.
Contact Trier Capital
At Trier Capital, we do all the hard work to find and acquire ideal properties, and then oversee asset management after purchase, while our investors sit back, relax, and receive tax-advantaged passive cash flow.
To get started with investing in multifamily properties, contact us today (630) 229-2383 or click here to connect with us online.