Why Multifamily Properties Are a Great Investment
Thinking of investing in a multifamily home? Looking to expand your portfolio by adding more investment properties? Now is a great time to expand or even break into the market.
Here’s why you should invest, or keep investing, in multifamily properties:
Aging and Growing Populations
Market trends and census data are showing that multifamily properties will become more prominent in the years to come, making them better investments than ever. Data from the past few years has shown that older generations are renting more, and with nearly 75 million Baby Boomers heading into retirement in the coming years, this number will continue to boom. Research is also indicating that many existing apartment complexes are being transformed into retirement communities.
On top of an aging population that is renting more, many Millennials are flocking to urban areas like Columbus. Combine this with the fact that younger generations are less likely to buy homes and multifamily property owners are set to have an abundance of renters seeking vacant units in the near future.
Smart Investments Yield Big ROI
Making the right decisions and investing in the right properties can yield large returns on investments for budding investors. When looking at a multifamily property to purchase, consider a few things:
- Net operating income (NOI): examine the operating costs of the building and the average income. Whatever is leftover is the net operating income (i.e. what you will make from owning and operating the building).
- Cash reserves: make sure you do not deplete your reserves when investing in a property, and never assume that a building will be fully rented 100% of the time. It’s a good practice to examine what percentage of the building will have to be rented out in order to cover the bills.
- Capitalization (Cap rate): divide the NOI by the current market value of the property. This is the cap rate, which helps you determine the amount of income a property can deliver in relation to its value. The higher the cap rate, the more you can expect in return.
If you follow these general tips, and manage the property well, you can maximize the ROI you get from a multifamily investment.
New Construction Costs Are Rising
Looking for existing multifamily properties on the market is becoming a more attractive investment. This is because, due to the costs of materials and other factors, construction costs for new apartments projects are on the rise (they increased 3.6% in 2017).
Break Into the Market
Now is the time to break into the market and start investing. If you are interested in learning more about the multifamily building available in Columbus, Ohio and the surrounding areas, contact Brown Multifamily Advisors today.