A Short Guide about Multifamily Investing

 

"Real Estate Investment" is a pretty broad and vague term. There are different types of real estate investment, from a single-family home, multifamily investing, mixed-use, office, retail industrial, and land. Each of them offers distinct advantages and disadvantages. In this article, we will guide you about the things surrounding multifamily investment using Private Real Estate Investment Firms.

 

Pros and Cons of Using Private Real Estate Investment Firms in Multifamily Investing

 

Pros

 

·         Better Investment Philosophy Matching-In every Multifamily Investing that you make, it is important to match the philosophy of the business. Are they adopting a conservative philosophy and practicing transactions with low risk while providing a handsome return on investment? Private Real Estate investing is all about that principles. 

 

·         Personalized Service- They are solely focused on finding the right investment matched with different investors.

 

·         Investment choice- Investors can choose which investments they want to participate in. With this type of alternative investment, investors are free to determine what type of private real estate property they want to invest in.

 

·         The firm doesn't hold investment dollars in between investments. Most private equity investment firms will contribute a massive investment share in every Multifamily Investing project that creates a financial pool, together with the investment funding.

 

·         Third-party verification/ control of investment- with this type of alternative investment, the party is required to employ the service of a third party who doesn't have an interest in the transactions. They are entities involved with the business transaction, but they are not the principal parties.

 

Cons

 

·         Higher minimum investment versus REITS or Crowdfunding- compared to Crowdfunding and REITS (real estate investment trusts), investing in private real estate investment firms requires a significant initial investment. This is because the cost behind the acquisition and maintenance is a little higher. Aside from that, the cost appreciation is slower, and there is a limited demand for it.

 

·         Illiquid for the most part- Illiquid resources cannot be immediately sold because there are limited investors interested in them. Illiquid assets can be cash transferrable, but investors will lose a portion of their alternative investments.

 

·         Must have trust in the asset management team- in case you choose this type of alternative investment, you have to trust the asset management team blindly. This means that they are in full control of monitoring and maintaining your investment.

 

·         Limited generally to accredited investors- based on the rudimentary definition of the US Securities and Exchange Commission (exempting some instances), they require that private placement should only be offered and made available for the accredited investors.

 

Minimum Dollar Investment

 

Private Equity firms require every investor to invest a minimum of $100,000. However, most managers are searching for institutions and individuals who are willing to invest more money than Multifamily Investing.

 

Liquidity to the Investors

 

Private real estate investment firms provide high risk and lesser liquidity, making it ideal for investors expecting around 20% of annual passive income. All in all, the nature of private equity is never liquid; fortunately, those who don't like this type of alternative investment can always sell their portfolio to other investors.

 

 

Commercial Multifamily Versus Cash Investment

 

With the instability in the value of properties, particularly where the price is volatile, more and more investors are noticing the value of commercial multifamily investing instead of diverting your cash into a fund managed by someone you do not know. It is not that rare that someone asks me if they should invest in multifamily real estate properties; my common answer would be definitely, but it still depends on your identity as an investor. Investing in a multifamily property is the smartest thing to do if you want to have a steady flow of cash every month. Here are some reasons you should invest your money in Commercial Multifamily and not in Cash Investment.

 

 

Easier to Manage

 

What do you think is easier to manage, a cash investment made to different people in different places with different terms of payment or multifamily investing located in a single location? When dealing with people who live in different areas, there is a tendency that you will employ other people to manage the cash investment. Still, with a multifamily investment property, you will only require the help of one property manager.

 

The Appreciation Rate

 

The amount of interest rate in cash investment is constant.   If you went over the average interest, you would never find a prospected client. With Multifamily investing, it is easier to force the appreciation of the value of your property. You can offer certain amenities to the tenants or improvement of the property. Adding a simple laundry area or any establishment around the property can massively appreciate the value of your real estate property.

 

Higher Cash Flow

 

With commercial multifamily investing, there is a higher chance of generating cash flow beyond the rents. Any available space that you have at the moment can be converted into a facility that can create an income. You have the option to invite transient renters, start a business establishment, and use it as a laundry room or others. With Cash Investment, you have a pretty limited way of generating a passive income and higher cash flow.

 

Retains their Values

 

When the time comes that you want to sell your multifamily investing property, you will end up generating a significant amount of assets than you spent. However, you still need to ensure that the property is well–maintained to appeal to the prospected buyers. Cash investment opens you to many risks and lower returns on investment.

 

Finally, by devoting yourself to multifamily investing properties, you will have the opportunity to convert this property into something that can affect the lives of others. Apartment buildings are normally covered with graffiti and filthy areas. By renovating the place; you will drive the appreciation of its value and affect your tenants' lives.