Multifamily Analysis – Learn How To Analyze Multifamily Properties

Multifamily Analysis – Learn How To Analyze And Choose The Right Multifamily Properties

jeremy raglin Portland Rental News and Tips August 19, 2021 | 0

Let’s face it, there’s no better investment in 2021 than multifamily properties because, with a multifamily property, you can earn consistent streams of income every month for years to come.

Sadly, some multifamily investors have a difficult time knowing what to look for in a property, or they get caught up in analysis paralysis and are always looking for properties without making a decision.

Thankfully, in this article, I will share with you the right process for multifamily analysis, so that you will know exactly how to analyze and choose a multifamily property that’s right for you.

Analyze The Area Statistics

The first step to analyzing a multifamily property is to analyze the statistics for the area that the property is located in.

This step is essential because the underlying data is what’s going to show you if that property will be the right destination for you to invest in multifamily properties or not.

Some of the statistics to review when investigating an area include:

Population – Ideally, you want to invest in a property that’s located in a city that has at least 200,000 people.

Besides a population of 200K, you also want to see steady population growth over the last 12 months.

Stead population growth is an encouraging sign because it shows that should you invest in a property there, you can expect it to be in demand.

Job Diversity – Another important statistic to analyze is job diversity because a city that has one primary industry that employs most of the people there like steel, or the automotive industries, is a recipe for failure and should be avoided.

A good example of this is Detroit, Michigan, a city with a rich automotive industry history but the sad thing is that since the city has been tied to the demand for vehicles, whenever there are layoffs at area companies, landlords ultimately suffer.

Ideally, you should look for a city that has a mix of jobs because this means that one industry suffers a setback, there will be other steady industries and jobs in the area that people can fall back on.

Median Household Income – If your goal is to invest in a Class B or C property, you should be focusing on an MHH of at least $40,000. This is important because it will provide you with peace of mind that your tenants will be able to pay their rent on time each month.

For cities where rents and the cost of living are going up. I would focus on a median household income of at least $60,000 to $80,000, even for Class B and C properties because people in San Diego, CA need at least $60K annually just to survive economically there.

Crime is also one of the most important Oregon demographics as well because if an area is unsafe to live in, this will also impact the income that you can earn from your property as well.

To research crime statistics, it’s best to search online first but for a more in-depth search, you may want to visit the local police department there.

What Does The Area Offer?

Since your goal as an investor is to purchase a property that will produce cash flow for you for years to come, another important thing to do when analyzing multifamily properties is to ask what does the area offers?

Are there name-brand shops, stores, restaurants, and grocery stores within the town, or are they all more than 30 minutes away?

Is the city a walkable location? This means, can someone easily get around on foot, or will they need to own a vehicle to live there?

Also, is there a Starbucks in the city where you plan on investing? If so, this is also a positive sign because if people are more than willing to pay up to $4 for a cup of coffee, this means that the area can be labeled as moderately affluent.

The good news is that this part of your research can easily be done from home because with Google Maps, you can get a good ‘birds-eye view’ into what businesses are available in the city you plan on investing in.

Learn More About The Multifamily Property

Once you feel confident that you’ve potentially found a property that could be a smart investment, the next thing to do is to visit that property in person because some properties don’t always live up to their real estate listings.

Some questions to ask when reviewing the property include:

Does it need work?
Can you add any upscale touches to the exterior of units of the property?
Is there room to add amenities like a clubhouse or fitness center?
Can you generate new sources of income from the property like laundry fees, storage fees, or application fees?

After learning more about the property, you should then dive deeper into due diligence by calculating the cash flow, NOI and making sure that everything the owner lists about the property makes sense after you’ve analyzed it.