Multifamily housing has always been a good investment. Investors have generally loved this sector.
In 2018, multifamily vacancy rates (for class B & C) have been below 6% while class A properties are about 9%. More and more investors are closing watching multifamily properties, particularly in B & C classes. These classes can maintain if there is a downturn in the markets. Unlike Commercial properties, Residential properties in these classes are generally recession proof.
Smaller Might Be Better
Class A properties are the most competitive among investors as well as attracting new tenants. But smaller is often times more profitable. I personally like quads and duplexes. We build quads on a regular basis but there are many duplexes, triplexes and fourplexes out there that are in need of repair. Great opportunities for value added investors.
Depending on your experience and skills, it is best to invest in properties that are relatively close to your location. There are several reasons for this. First, you can keep a better eye on your investment, you have formed relationships with bankers, vendors, contractors etc. This is important to get good and fair pricing for services.
Out of state properties have a lot of additional risks involved. When you need repairs, unless you have a trusted vendor, you will more than likely pay a premium for any work done. In addition, you are not able to inspect the work once it has been completed. Whether you use software to manage these residential properties or you hire a property manager, things get more complicated when you invest out of your area.
Need a list? Here are some reasons remote workers outperform office workers:
Understanding the Neighborhood
Another issue with out of area investing is that you really don’t know the neighborhood. Understanding the neighborhood is important. Understand the demographics, characteristics and trying to understand where this neighborhood may be in the next few years takes more then looking it up on google earth. You should understand the city or county’s revitalization plans (if any), know where the up and coming neighborhoods are, any new businesses moving in or businesses planning to leave the area. This is information that is harder to come by if you are just looking at properties in areas you are not familiar with.
Checkout the government’s new Opportunity Zone program. Governor’s in all states have designated 8700+ opportunity zones. These zones offer special tax benefits while providing investment opportunities for co-ownership with other investors.
These opportunity zones were part of the Tax Cuts and Jobs Act of 2017. The purpose is to encourage investors to invest in distressed neighborhoods throughout the country.
Investing in these zones may be something that will fit well into your portfolio.
PropertyZar is a real estate technology company specifically in the web-based property management software for owners and professional property managers. Read more Top Property Management Blogs. Learn more www.PropertyZar.com