Is the multifamily sector overheated?
This is a fair question to ask since many investors are coming up against new and inexperienced investors who may be unscrupulous and overpaying for properties in some markets.
Why are investors overpaying for multifamily properties right now? Some of the reasons include the fact that there may be more investors who want to utilize 1031 exchange funds before the rules change.
Because economies around the world are changing, there have also been more institutional investors from China and other countries who want to invest in the U.S. dollar and choose multifamily as their preferred investment vehicle to get their start investing in the United States.
All of these factors mean that multifamily investors face more competition when investing in multifamily properties in the USA.
Even though the multifamily sector is competitive right now, the truth is that it’s far from being overheated, especially if you turn your attention elsewhere and start searching for properties out of state.
If you’ve not started looking for multifamily properties out of state, this article will provide you with tips that you need to know for getting started while also answering questions that you may have about investing in out of state multifamily properties.
Tip #1 – Choose The Right Market
You may be familiar with the multifamily real estate market in your city or state but to find more deals it’s time to focus on investing in other deals out of state.
To get started with choosing the right market, it’s important to analyze which markets have the most opportunity right now.
Texas, Florida, North Carolina, Idaho, and Ohio have all been identified as top states for investing in multifamily real estate in 2021 so these would all be excellent places to start.
Once you identify a state that you would like to target, the next step is to focus on a specific city for investing in multifamily properties.
For example, in Texas, the Dallas area is growing fast right now and the growth there doesn’t show any sign of slowing down but if you wanted to find multifamily deals where there’s not a lot of competition, try searching just outside the DFW area.
Some of the cities to consider include Irving, Fort Worth, Allen, Addison, Flower Mound, and Richardson Texas.
Tip #2 – Start Networking
After identifying multiple cities or states that you would like to target, the next thing to do is connect with multifamily investors in those areas to find out what marketing methods are working for them.
Since you’re not in direct competition with them, most out of state investors will be open to sharing information with you, especially if you’re willing to share with them what’s working for you in your market.
When speaking with other out of state multifamily investors, don’t be afraid to ask them how often they are marketing, who they are marketing to, and what they’re tracked KPI’s maybe. This will be valuable data for you and also give you insight into how you should move forward with your marketing.
Besides speaking with investors in different cities or states, you should also consider joining mastermind groups in some of those areas as well.
Thankfully, websites like Bigger Pockets make it easy to join mastermind groups because they are free to join and are excellent for bouncing ideas off other investors.
Tip #3 – Create A Plan Of Action
After you’ve connected with other investors nationwide it’s best to create a plan of action for searching for properties in the city or state that you want to target.
During the process of reaching different cities for multifamily investing, make sure that you are reading up to date information on those cities because some cities may have changed in the last 12 months due to economic or social unrest.
Your plan of action should also include connecting with owners directly and utilizing marketing strategies that the competition isn’t doing because there’s nothing worse than trying to use the same marketing methods in an area that every other investor is using.
As I’ve mentioned in previous posts, you should be searching for deals in areas that can be classified as ‘up and coming economically’, are close to shops/stores/restaurants, and have plenty of things to see and do.
Always remember to review your marketing methods, especially your KPI, every 30/60/90 days to confirm that your marketing has been effective. Look at data like cost per lead, profit per lead deals from offers, and offers from appointments because your marketing is one of the top things that will grow the profits for your business.
Tip #4 – Practice Due Diligence
Last of all, but most important, when you find a property that you are interested in buying, don’t forget to practice due diligence.
This means that you’re going to take the time to ask for and review things like:
- The property’s 12-month operating statement
- Rent Roll
- Real Estate Tax Bill
You should also have an inspector do a unit, unit inspection so that you’re of any issues that the property may have before you submit an offer on it.
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 learn more about the benefits that come from partnering with us, contact me today by calling (630) 229-2383 or click here to connect with me online.