Are you looking for quick answers to your questions about multifamily real estate? Look no further than this article by Bill Ham, which provides answers to some of the most frequently asked multifamily real estate questions. With years of experience in the industry, Bill Ham is well-equipped to provide comprehensive and authoritative answers to your queries. In this article, he provides useful insight into the multifamily real estate market and offers guidance on how best to approach it.
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What do you prefer, a single family or a multifamily investment?
You make cash flow on single family homes when you steal them. Multifamily makes cash flow by design. Houses were never meant to be income producing investments. They were meant to be homes to live in. They may cashflow when you pay the right price but apartments produce revenue as a general model.
How do you find multifamily investments with high returns?
“Depends on the size. For deals under 50 units, you should spend most of your effort going directly to owners as opposed to working with realtors. Once you get to about 50 units and up…you are in the commercial realtor space there. Have you ever seen a 200-unit apartment complex with FSBO and a phone number scribbled on a piece of card board, and stuck out by the road?
Small = owners and big = realtors.
What does value-add multifamily investments mean?
“Value add” meant that you are buying a property that can be improved in some way and the value will go up (forced appreciation) after the improvements are made. Most speculators in the apartment space consider value add, to be renovating the interior of the unit (paint, carpet, countertops, etc.). True multifamily operators know that there are many more ways to create value on an asset. Valuation through operation, not renovation.
How do I analyze multifamily investment opportunities?
The basic RE formula is –
Income – Expenses = Net Operating Income (NOI)
NOI – Annual Debt Service = Cash Flow
Cash Flow / Acquisition Cost = Cash on Cash (CoC)
Note- annual debt service is the annual mortgage payment and acquisition costs are the total down payment plus any closing and rehab costs.
What is the 50% rule to analyse multifamily investment property?
This is referring to a general rule of thumb for an expense ratio. The 50% is the ratio of expenses to income on a larger apartment complex. On average you will spend about 50% of your total annual rental revenue on operating expenses. This is called the Operating Expense Ratio or OpEx for short. Keep in mind that OpEx is calculated using only the operating expenses. Debt service (bank payment) is not included in operating expenses. Note- smaller properties (less than 50 units) will usually run for less than 50% OpEx.
Is there any multifamily cashflow series to learn multifamily investing?
You can join the free FaceBook Group called ‘Real Estate Raw’. We conduct free live sessions every Wednesday over there. You can visit www.RealEstateRaw.com to check out all the free resources.
How do I find a good multifamily investing opportunity?
The first step is to be good at multifamily deal analysis. When it comes to investing in apartments you need to be good at understanding the numbers. Multi is all about the numbers. Once you are good at deal analysis you can then focus on deal flow. As for deal flow… if you are looking at deals that are less than 50 units, you should go directly to the owner (direct call, mail, text, etc.). If you are looking for deals over 50 units, you will mostly be working with commercial realtors.
