Building Versus Buying a Multi-family Property
Real estate is one of the most lucrative and exciting businesses to participate in. Rental properties, particularly multi-family properties provide stable cash flows and are one of the best investments that can be made. Overall, multi-family properties are less risky than other types of commercial real estate and in general are easier to finance as well. If you and your real estate company are in the market for a multi-family property, there are some things that you will want to consider.
Buying
Once familiar consideration for any real estate investor, is studying the pros and cons of building versus buying when it comes to a multifamily investment. When you are looking to purchase an existing multi-family property, you will want to thoroughly evaluate the building. It is also important to make sure that there are no major issues with the property, and that you are not investing your money in a headache. Have a contractor or engineer that you trust go with you to perform due diligence on the property and have them provide you with a detailed inspection which includes the foundation, the structure and the condition of the building. Also be sure evaluate the roof, plumbing, electrical and any previous repairs done on the property.
Building
An alternative to buying an existing multi-family property is to build one. When looking to build a multi-family property, the process and analysis is completely different. Instead of worrying about making a multifamily investment that is good for business, investors can instead choose the layout and customize the features of the building itself.
Building from scratch means that everything will be brand new and you won’t have to worry about out of date styles, restrictive infrastructure, old wiring and other potential concerns. When constructing a new multi-family property, you get to choose the location, amenities, latest technologies and incorporate innovative building techniques. In addition, another benefit is that you get to select the site of your new building.
As cities expand and contract, being able to select an attractive, prosperous neighborhood can make the difference between success and failure. Brand new apartments mean that you can ask for top dollar rents, with increasing property values over future years. While you may be paying more in the initial investment to have a multi-family property built from scratch it would be worth it over time and can end up saving you money and reaping a larger return.
Conclusion
When investing in multi-family properties you have to make sure you are investing it the right way for your business and not regret in the future. Contact an engineer or architect – or establish a relationship with one that you can trust – and find out how much it will cost to have a multi-family property built from the ground up. The alternative could be buying an existing property that could have underlying plumbing, HVAC or electrical issues that winds up costing you more in the long run. Not only that, but in recent times, finding and buying Class B and Class C properties is becoming harder with time, and with rising costs, building could actually turn out to be cheaper – and that too with added benefits of a brand-new building without any residual issues from the previous owners.
No matter if you are buying or building a multi-family property, you still need to evaluate whether the investment is right for you. Identify the right location, run the numbers, calculate the expected cash flow, figure the capitulation rate, and analyze all of the costs. Multi-family properties can be a lucrative investment and building a new one typically offer investors an advantage.
