When you’re learning how to make your money work for you, it’s only natural that you’d consider real estate investing. For beginner investors and new real estate enthusiasts, the multifamily property sector continues to hold great appeal. Smart investors recognize that multifamily real estate investing offers tantalizing yields and beginners view multifamily properties as excellent cash flow opportunities.
Other residential real estate investors view this asset class as the natural progression from a single-family home or rental property. Multifamily investments are a great way to generate passive income, boost tenant cash flow, and bolster your bank accounts. But, of course, this is all dependent upon your ability to find the right multifamily properties for your investment portfolio.
When you’re looking for an investment opportunity — in real estate or another market — you must know how to vet your multifamily prospects. So, whether you decide to work with some real estate pros or you’re interested in a real estate investment trust (REIT) that offers multifamily portfolio options and stock market trading, here are some of the best ways to find top multifamily opportunities.
1. Choose your multifamily property type.
To better narrow down your results and get more relevant multifamily listings, it’s effective to narrow down the type of multifamily unit you’re looking for. While multifamily is its own investment type, some subclasses include duplexes, triplexes, apartment complexes, and other housing types. When you’re trying to decide on a real estate opportunity or multifamily property, you should consider your current experience, your general risk tolerance, and how much money you’re able to invest in a rental property.
To determine which multifamily housing options make sense for your investment strategy, you should also refine your commercial real estate or multifamily property real estate goals. For example, depending on your personal finance, your borrower history, and your experience as a property manager, you may want to consider fix-and-flip opportunities (much like you’d do with a single-family property or single-family home), or you could hire a property manager and delegate landlord tasks, tenant communications, rent collection, and maintenance.
If you choose to work with a property manager, it’s helpful to contact a financial advisor to discuss how these expenses, lender fees, mortgage payments, and down payment amounts could impact your financial stability. For individual investors looking to generate rental income, deciding on a property type and reviewing your personal finance goals is the first step towards multifamily property success and can help you find the right opportunities.
2. Work with a real estate agent.
For those that don’t want to be as involved in the multifamily housing search, a real estate agent can help you in the long run. Realtors can educate you on each type of investment opportunity, help you learn the amount of money you can afford to put down, connect you to lenders, and help steer you away from higher-risk situations. For instance, if you’re trying to make the jump from homeownership to apartment building management, a realtor can help you understand that the cons might outweigh the potential of a higher return.
Realtors can also facilitate long-term success. Working with an agent is a good way to generate a better return on your investments, mitigate investment risk, and find residential and commercial properties that align with your financial goals. With MLS access and real estate industry knowledge, a simple reason to work with a realtor is that they’re typically incredibly well-informed about market conditions.
Though realtors aren’t always potential investors or silent partners, you can work with an agent to network, connect to property owners, and potentially open up off-market rental real estate that isn’t currently on the local housing market. So, to make money work for you, build wealth, and make sound investment decisions, working with a multifamily realtor is a sensible choice.
3. Network to the best of your abilities.
For some homeowners, individual investors, or borrowers, networking can seem like a hassle. After all, working with different sellers, lenders, individual investors, and potential partners can take a long time. However, it’s often an essential next step when trying to find the best multifamily property opportunities, no matter your financial situation. If you already work with renters or you manage a duplex, condo building, or similar multifamily property, you should consider joining a landlord association if you haven’t already. Doing your due diligence can cut down on the amount of time you, your spouse, and your partners have to spend on multifamily networking and connect you to top opportunities in your area.
If you’re lucky, multifamily networking will provide the same steady appreciation as one of your investments. It’s one of the smartest ways to connect to other landlords, property managers, and investors, many of whom will eventually want to sell their multifamily properties as part of a retirement plan, retirement fund, or other financial situation. When you have these established contacts, it’s easier to negotiate the purchase price of any rentals and other upfront costs.
4. Drive around your local neighborhoods.
One of the easiest ways to find a multifamily property and start generating additional income is to browse your local markets in person. Instead of relying strictly on real estate websites and multifamily property searches, start making your money work for you by driving around your preferred neighborhoods. In most cases, you’re liable to see “For Sale” or “For Lease” signs throughout many multifamily and commercial spaces. Depending on the property, you may be able to negotiate low interest rates and collect stronger dividends from your investments.
Many listings you’ll see out and about may require some degree of renovation, which is particularly appealing for fix-and-flip projects. Necessary renovations can lower mortgage expenses, down payments, and interest rates, which is always helpful in a seller’s market. Any chance you get to save money (think of it as free money) or keep funds in your savings account or checking account is a win for a prospective investor.
5. Search for off-market multifamily real estate listings.
Sometimes, to find the best multifamily property deals, you need to be more proactive. As you’re learning the ins and outs of the multifamily investment space, there will likely be a time when on-market listings aren’t enough for your financial goals. As your credit score grows and your paycheck expands, you’ll probably want to consider building your real estate portfolio. Often, the best way is to find multifamily properties that fit your criteria and look up the owner through public directories. With a little bit of info, you can hopefully find ways to make in-person contact and discuss any investment opportunities. If you’re directed to an LLC or business listing, look up that listing directly.
You can always keep their information and wait if a person isn’t ready to sell. This goes for single-family homes, too. In the real estate industry, circumstances change more frequently than you’d think. Since most real estate investing is a numbers game, it’s about casting a wide net, following up on leads, and closing on valuable investments. While you may only close a few deals out of every 100 contacts, these high-value multifamily property investments can bolster your checking account, help you build wealth, and grow an emergency fund.
Once you’ve found the right multifamily properties, you can lease out spaces, research amenities that millennials and Gen-Z tenants crave, and find ways to fill property vacancies.
About the Author:
Annie Dickerson and her partner Julie Lam are founders of Goodegg Investments — an award-winning real estate private equity firm — and creators of the Real Estate Accelerator Mentorship Program. They are authors of the book Investing For Good and hosts of the popular Life & Money Show podcast: good egg investments
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.