Investing and managing a multi-family community requires increasing responsibility and seeking guidance to streamline the process. 2020-2021 was a difficult year for all business sectors, with some changes in the management of complex and residential neighborhoods. This year is a good time to “dive” in the management of multifamily properties. It takes very well-considered steps before buying to get high value from the property, as well as good opportunities to attract residents.
In the following lines we will introduce you to the important details before, during and after the investment in a multifamily property, so as not to make gross mistakes.
A complete guide to investing and managing multi-family property at every stage
The moment before the purchase – important investment considerations
Choosing a location
This is the first factor that does not tolerate any underestimation.
Choosing a location is crucial to buying a property. Important selection criteria here are:
- where are the schools
- business centers
- retail stores
- restaurants and bars
- entertainment and culture
- transport links
- what is the level of crime
- what type of community inhabits the place and more.
After getting acquainted with this valuable information, you can find the perfect place, according to your requirements. Perhaps your criteria will determine several key locations to choose from. Easy access and most extras will make the property more expensive, but will also attract more interest in housing.
Make accurate financial calculations
Each investment is accompanied by a well-developed business plan and especially the financial part. It all comes down to how much and what you can afford and what net operating income you can expect. It is also called NOI and is determined very easily – the difference between the estimated monthly rental income and estimated monthly expenses of your multifamily rental property.
NOI is the most valuable indicator that will “open your eyes” to your future investment.
Investment – banking conditions and added value for residents
Banking requirements are currently slightly more lenient due to the many bad loans that flooded the market. You will probably be thoroughly screened and told how much they can finance you with. It’s good to know that this type of investment is usually financed in much the same way as mortgages with competitive interest rates. In addition, it matters how many housing units you buy – four or fewer units is a housing investment, but already one or more – make the housing investment a commercial category full of sales agents and loans.
Increased satisfaction of residents, as well as improved cash flow, are also key steps that multi-family governance should consider. This includes activities to find additional sources of income, such as rental of furniture, parking spaces and others. All this income must be added to your finances, except for the monthly rent.
Rental Level Forecasts and Expectations
A net 6% increase in net effective rents and a return to vacancy rates is projected before COVID for 2021. This is a well-calculated scheme presented by CBRE. Employment levels varied around 96-97%. Multi-family properties are classified as easily more complex assets, they have two or more residential units.
Rents are expected to gradually increase as a result of overcoming the crisis situation and returning to a normal lifestyle.
When investing – choose the right combination of amenities
The distance and lack of social contacts prompted many residents to buy their pet for company. However, as in many communities their presence is prohibited or there are specific requirements, this convenience has proved to be quite a challenge.
This fact also prompts property owners to think in this direction, allowing the admission of various furry friends.
Over the past two years, the home office has become a practice for over 50% of employees. There are several important conditions for the smooth performance of work activities – fast internet, workspace and safe rooms for joint work.
- Many new tenants are willing to pay a higher amount to gain high-speed Internet access.
- Some community managers even invest in workstations in their communities. This allows the tenant to change jobs when he decides he wants to change the setting to feel more productive.
- Tenants are also looking for well-organized apartments with separate work areas. The home has become a place for everything – work, training and entertainment. Whether there will be a desk in a separate room or the large living room will be divided into a relaxation area and a work area.
The personal home and the rental one have become our refuge – literally. Many people have created places for fun and work, as well as almost a real gym. This necessitated the search for more squares, ie. larger properties for rent. While many people used to settle for smaller and more compact homes, they now tend to pay higher rents but get more space.
Package management with Smart Lockers
Smart parcel terminals are what attract a number of new residents to apartment complexes. No modern community is deprived of such convenience. Once upon a time they were rare and people saw these innovations as something new and different, but today they are one of the important criteria for choosing a place to live.
By providing the opportunity for easy, convenient and contactless shopping, consumers would come and rent an apartment in your property. In addition, residents expect their packages to be in a safe and secure place until they go to get them. Here is an interesting fact – the installation of cabinets for packages can raise the renewal of the lease by 40%! Well, the investment is worth it, isn’t it?
Automatic lockers offer a number of benefits, including efficient family property management, utility, safety, reduced costs and management time, and more. Everything happens automatically – from the moment of receiving a notification from the user, to the self-opening of the cell with the corresponding barcode.
Post-purchase – ongoing maintenance and improvements
Mobile applications to make management easier
We live in a digital world filled with many community remote control options. Residents expect exactly this – notification via messages for any valuable information – updates and changes on renewal of rents, repairs and more.
There are many different mobile applications that you can take advantage of for quick and immediate communication with the residents of your property. And for those who are interested, you could offer a great virtual tour to get acquainted with the condition of the property from a distance.
Service as a secret weapon
During the epidemic, and rather in the most hectic times, companies looked for ways to improve the customer experience, but it collapsed. Today, residents are reluctant to tolerate and reconcile, but seek a good consumer experience. One of the most significant reasons why residents leave multifamily buildings is the lack of adequate time for reactions and maintenance. If you focus on improvement in this direction, residents will be loyal and you will notice an increase in new demand for the property.
As you can see, there are many “slipping stones” in the way of investing and managing multifamily property, so you need to be well prepared for this step. Take all the guidelines into account and you will achieve the desired results – a reasonable investment that will bring you profits.