Investment Strategies

SS40: Multifamily Real Estate Investing Strategies

Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing a number of different ways to invest in multifamily properties.

Talking Points:

• Multifamily real estate can be classified as housing with multiple units (2+ units)

The Different Types of Multifamily Properties
This can get quite comprehensive and includes:
• Duplexes
• Triplexes
• Quadplexes
• Apartment Buildings
Although anything consisting of several rentable living spaces fits the bill.

1. House Hacking; The Benefits of Investing in Multifamily Real Estate
Some argue that multifamily real estate investing is perhaps the best way for new investors to get started in real estate investing.

The benefits of investing in multifamily real estate and house hacking include the ability to live in one unit while renting out the rest, less inherent risk given multiple tenants, and a greater number of financing options

There are multiple reasons for this sentiment, ranging from Federal Housing Administration (FHA) financing that starts with only 3.5% down and the ability to live in one unit while renting out the rest. An option not readily available with most other properties.

2. Investing In Value Add Multifamily
This strategy is typical what you hear from multifamily investors. Purchasing properties that have undervalued rents compared to neighboring properties; usually requiring renovation and new management in order to achieve higher rents.

3. Investing Yield Play Multifamily
This strategy is not typical and usually reserved for larger investors that want to purchase properties that are in great condition; fully rented to good tenants

Tips For Investing in Multifamily Properties
• For smaller properties; utilize the 1% rule as a simple way of calculating if a property appears to be overpriced.

• It is also possibly to mix some of the strategies to minimize risk;

o purchasing a semi- renovated or updated property with some higher rents and some lower rents – proves the new strategy is working – proof of concept

o If you have some reserves; maybe purchasing a value-add house hack is a great strategy for you

o Purchasing a house hack that is totally updated with good paying tenants with one vacancy ready for you to move into (ideal – highly suggested)

• Some other keys for investing in multifamily real estate are lining up your financing, figuring out your monthly cash flow and expenses, and the cash-on-cash return (also maybe the total return or IRR when investing in larger properties)

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