Two Valuable Ways to Find Multifamily Investment Opportunities

 

Multifamily properties have become popular real estate investment vehicles. Experienced investors discover that combining their expertise with more doors to rent can supercharge profit margins.

This realization has sent more investors into the multifamily market, looking for properties to add to their portfolios. This increase in competition in turn makes it harder to find quality deals that will cash flow at the rates investors need.

Part of the reason for this is that many investors are looking for the same type of inventory, and that inventory is limited. This limited inventory usually includes Class A multifamily properties located in the biggest markets in the country—whether those properties are new construction or value-add investment opportunities.

One result of this single-minded focus on limited inventory is that competition for these premium properties is intense, driving up purchase prices and leaving scarce margins for profit.  Another result is that many lenders have become so accustomed to these kinds of properties that they are reluctant to lend on other classes of properties or in smaller markets, further pushing investors toward the same limited inventory.

This creates a vicious cycle that makes it harder to find and finance multifamily real estate investment opportunities off the beaten path. But this focus on limited inventory can also create opportunities for investors who have open minds and the right contacts, and are willing to expand their horizons.

Here are two key ways you can get creative and find multifamily investment opportunities that others overlook.

New jobs—Announcements of new jobs should lead real estate investors to investigate multifamily properties in the surrounding area. For example, when a manufacturing plant brings hundreds of new jobs to an area, the rental market will pick up. These effects may not be market-wide, but they can impact specific neighborhoods significantly, especially in secondary and tertiary markets.

Following these kinds of economic development announcements can help real estate investors identify geographic areas that may have attractive multifamily investments that can provide workforce housing opportunities even before an area gets hot. This allows you to find properties you can stabilize with full occupancy and potentially even increased rents.

Transitioning areas—Job growth isn’t the only reason that geographic areas quality multifamily rental options. Neighborhoods that are transitioning or gentrifying can be home to properties that can yield increased rents with a value-add approach.

When they find these kinds of properties, savvy investors can upgrade them from Class C to Class B, increase rent rolls, and improve the property’s DSCR.

Here’s an example from Greenville, S.C., where Lima One’s headquarters are located. The development of a walking/biking path called the Swamp Rabbit Trail has turned several neighborhoods that formerly were abandoned and crime-ridden into popular places for young professionals to live. Investors who rehabbed and rented multifamily properties or single-family rentals near this trail have profited greatly.

The bottom line: Local knowledge is vital

Both of these keys reveal how strong local knowledge can unlock multifamily investment opportunities that most investors miss. This is especially true in secondary and tertiary markets outside the biggest MSAs, and with Class B and Class C properties.

You don’t just need this local knowledge—you need a lender who understands that such local expertise should be considered in the underwriting process. Lima One Capital does this, funding unique deals in markets like Texarkana, Texas, and unconventional properties like this one in Kansas City.

If you’re a real estate investor who finds a multifamily opportunity in places others aren’t looking, contact Lima One Capital today. We’ll use your local knowledge to provide the right loan solution, and will provide efficient underwriting and a quick closing so you can take advantage of the multifamily opportunities you find.

Lima One Capital, LLC. NMLS ID # 1324403, 201 E. McBee Ave. Suite 300. Greenville, SC 29601. Lima One Capital, LLC is not currently licensed in AK, ID, ME, MT, ND, NV, SD, UT or VT. Lima One Capital, LLC is licensed or exempt from licensing in all other states. Minnesota: This is not an offer to enter into an agreement. Any such offer may only be made in accordance with the requirements of Minn. Stat. §47.206(3). Lima One Capital, LLC is licensed in Arizona as a Mortgage Broker (License No. MB-0936439) and Mortgage Banker (License No. 949706). Lima One Capital, LLC is licensed as a California Finance Lender under Department of Business Oversight (License No. 60DBO-45834). Lima One Capital, LLC is licensed in Florida as a Mortgage Lender (License No. MLD1555) and Mortgage Servicer (License No. MLD1662). Lima One Capital, LLC is licensed in Oregon as a Mortgage Lender (License No. ML-5397). Annual percentage rate may be increased after fixed-rate period expires. Loans are subject to additional underwriting criteria.