The Multifamily Value Add Strategy
While multifamily investing is quite passive for those investors, it may also be good to take a deeper look at some of the strategies that come from multifamily investment syndicates.
It’s much more than simply pooling money together and buying a larger property. Looking at the different stages can show just how important it is to find the right type of multifamily investment partner, such as Crown Capital, who take the necessary steps to maximize the ROI of the investments.
Finding the right property
There’s a bunch of research and investigation that goes into it. This goes beyond finding a property in a good area that’s ready to be rented out. It’s important to assess the age of the building, how well it’s been maintained, whether there are any outstanding liens on it, and so forth.
Acquiring the property requires a certain level of due diligence that needs to be done so that the investment can become lucrative sooner and generate the best passive income and, ultimately, the best returns with no complications. Then it comes with actually purchasing the investment property, which doesn’t require the investors to handle much paperwork. Crown Capital works on all of the processes, while investors can simply wait for their returns.
Increase property value
This is an interesting part of the value-added investment lifecycle. This allows for some properties to be purchased that, with some renovations or upgrades, can actually be worth much more down the line. So it’s essential to understand that part of the investment goes to the refurbishment of properties, which will help with their resale value down the line. That means everything from renovating all the individual living spaces, whether they are apartments or different single-family dwellings, either from the ground up, or simply upgrading certain areas, such as the kitchen or the bathroom.
It’s also important to look at renovating the common areas and the property space outside, which can help curb the curbside appeal when it comes time to eventually sell the property.
Reduce the debt if necessary
This isn’t always a necessary part, but with renovation completed and time passing, that helps to increase the property value; if there are any outstanding mortgages, it could be the right time to refinance to lower rates due to better LTV or loan to value calculations.
Collect that passive income
Then it’s all about getting in the renters, and the passive income, while the property starts to appreciate in the long term. Real estate is a much longer-term investment strategy. Yet now that you have many nice accommodations, the amount of rent that can be charged is also higher, leading to a higher monthly passive income. This can go on for quite some time as the capital appreciation rapidly grows due to all the renovations.
The passive income also ends up growing year over year, as the rents can easily increase on an annual basis. Again, this helps to improve the rate of return and have your initial investment simply compounded due to this increased rental income.
Selling the property and cashing out
This final step can occur as part of a holistic value-added strategy. By this time, there have been several years of rent collected, with the capital appreciation that comes in from the property value going up, in part because of the market, the debt reduction, to speed up the payment process, and the renovations were initially done to enhance the property itself.
Keep in mind that selling may never happen if the passive income is stable. In fact, it may even be a better idea, depending on the investment company, to leverage the property to purchase other multifamily homes and increase the return amount through the repayments of the leveraging of the initial property.
Always work with experience
This is just a simple guide on one of many paths that can be taken with multifamily real estate investment. Crown Capital is dedicated to taking a more active approach in the management of any of the properties, reviewing the overall market conditions, and making the most data-driven decisions possible to always help the investors maximize their returns.
We will only choose the path that makes the most sense, such as holding off on refinancing if the interest rates will continue to go up or only handling renovations when they seem fiscally responsible. In the end, we look at all the different factors and look at the IRR that is at the highest amount, to lead to financial freedom for investors.