Multi-family real estate has been a hot ticket item for a while now, as people are moving out of the “flipping” mode and into a stronger investment mindset, they are taking a much deeper look at multi-family properties. And while this is a good thing, and obviously what we do here at Magnolia Design Properties, it is also a challenge, because the “easy” deals that were around a few years ago are long gone and you have to be much more diligent in your hunt for the right property for your portfolio. They are out there, just waiting to be found, but it will take a little bit of strategy and a lot of patience.
When we are looking at buying a new property, we are looking strictly at value add properties. These are properties that can immediately be improved upon by simple maintenance, upgrades, and amenities. They are graded based on how much improvement they will require, and we specialize in B-/B+ class add value properties. This means that they are generally a little older, but still have decent quality management and tenants but typically need upgrades to bring to market value rent levels. It used to be that the best value add properties were old buildings that had been well maintained, but needed a lot of work to change their class. You could buy them cheap, put most of your capital into renovating, and up your rents immensely. But these days, a lot of those deals have been scooped up and you have to look a little deeper than that! Some of the most beneficial properties that you may be able to fine were built in the early 2000’s, and making them more efficient and improving their management staff and operations can put you on the right track for a highly successful property.
To Renovate or To Not Renovate
How much renovation is too much? This is a hard question to answer, but if you are looking to get started in a new multi-family property, you are probably better off with less renovating. The cost of delayed work, work you were not anticipating, and other factors could really make or break your deal. What looked like an easy flip could turn into a huge money pit and when you are working in commercial, multi-family properties, there is rarely an easy way out. Make sure that you are fully aware of the scale and scope of the work by walking the property and assessing interior and exterior conditions and understanding the financials and the rent roll that is provided by the broker. Doing the pre-due diligence and performing conservative analysis on each property will mitigate most risk to you as investors and the investors you bring in to the deal.
Are you interested in investing in value-add properties that happen to be situated in popular housing markets, that are underwritten to return favorable, strong returns? Let us help! Magnolia Design Properties is a real estate investment company that is honed in on value-add, under-performing multifamily properties in the B+/ B- class and we would love to have you join us in investing! Let us do the heavy lifting of property acquisition and asset management. Head over to our contact page and fill out the form so that we can contact you with information about investment opportunities that you can join us in!