Multifamily Market Selection for new investments requires knowledge of population growth factors, economic factors, demographic factors and much more. Understanding what the correct information to collect is and how to analyze the data can go far to assure project success.
To begin with, the investor needs to review some very basic information including:
- MSA population,
- Population growth trends,>
- Demographic data with special attention to the largest renting groups which are:
- Under age 35 over age 55,
- Minorities, and
- Single mothers
As an investor, a determination of the length and strength of growth expected is important. For instance, the investor could set the bar at 10% per decennial and at least 10% for the current decennial. Having made that determination, similar choices need to be made for each of the main renting demographics.
Having made these choices, the MSA employment information becomes critical. Who are the major employers or major employment sectors. Are they growing and are the renting demographics benefited or harmed by the trends identified in this area. Are there factors at play macro economically or in the target market that could harm the employment situation. For example, is the dollar in a long term value growth trend and the major business sectors in the target market focused on exports? If so, this market may have long term weakness and should be avoided. This type of analytical review must be applied carefully and broad forecasts included in the investor’s decision making.
Next, infrastructure needs to be examined. A city that enjoys port access and a large international airport could be very well positioned for success if trends suggest a weakening dollar will drive export businesses. Or, if the market is the home of a large university base current trends suggest significant growth in the student base because of underlying national demographic trends. Additionally, the higher education access is a strong driver for new business creation in the information based global economy. An older and significantly aging population suggests usage concepts and growth for healthcare requirements.
What about taxes? Does the market offer a positive multifamily tax environment? Or, will permitting be readily available for the changes the investor may be considering. Are housing laws supportive to landlords. Can the investor anticipate quickly evicting tenants when behavior or rental payment problems develop. The political, regulatory, and tax environment can be very positive or very negative. Investors need to measure this in their plans as they plan management, legal, rent loss and other factors.
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Introduction to www.thepowertobefree.com Michigan Based Commercial Real Estate Investment Club. Darrick Scruggs – one of the founders of The Power To Be Free , the real estate investor with over 10 years of experience in investing in SFH and apartment buildings gives a brief introduction about himself and the club
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Wondering what is the best way to finance an investment property?For an investment property (not to live in) should I use a home equity line, traditional fixed rate 30 year mortgage or something else. Let's say I want to hang onto it for maybe 10 years….
It does not pencil out well, you will be in the red every month. The house payments, insurance and CC will be double the rent, and you have to pay income tax on the rent.
This is a bad investment.
Since Investor #1 paid rent and primarily maintained the home, it would be split like this
$250,000 purchase price; profit is 75,000 (I assume you have already taken the maintenance out of this)
Investor #1 paid $150,000 / $250,000 = 60% of $75,000 profit = $45000
Investor #2 – paid $75,000 / $250,000 = 30% of $75,000 = $22500
Investor #3 – paid $25,000 / $250,000 = 10% of $75,000 = $7500
If you haven't taken out the maintenance, then you need to deduct the cost of maintenance out of the profit and pay each of the parties back for the maintenance they paid. Keep in mind that investor #1, as a renter, would normally have had to maintain the property but I'm assuming that he did more than just "maintain" the property.
Without going into a lot of the theory, basically you can reduce your specific risk and increase your expected return by carrying a portfolio of properties with different levels of risk that have low corrolations.
For example you might own one property, a 20 unit apartment building in Anderson, In. The Delphi plant closes, 10,000 employess are laid off, and all of a sudden you apartments have an 80% vacancy rate. Very high risk.
But if you own 10 properties, only one of which is a 20 unit apartment building in Aderson, In., and the others are include say a 640 acres soy bean farm in Illinois, a shopping mall in Miami, Fl., a building of doctors offices in Columbus, Oh., and 30 lake front lots in North Carolina, your specific risk is reduced and your overall portfolio return will increase.
I do not know of any disadvantages other than it is all based on probabilities and the price that you pay for a property should be based on the return you expect and the risk associated with receiving that return. If you do not know the risk and expected return, you do not know the appropriate value of the property and the theory is not going to do you much good.
I am thankful to have seen this video. Great one! thank you and keep up the good work!
Wheeler Commercial Property Services, LLC, Brian Mannlein, Fort Collins, CO, (970) 225-9709. Wheeler Management Group, Inc. Ron Randel, Greeley
Hope you get in contact with them.
The 1031 (refers to Internal Revenue Code Section 1031 which explains the exchange) "like-kind" exchange has specific criteria to qualify as a nontaxable event. You must exchange for similiar BUSINESS USE property and you must use a qualified intermediary if you are buying/selling real estate that is not a "direct" exchange. The delayed, non-direct exchange is referred to as a "Starker" exchange. The qualified intermediary will handle all money – if any actually comes to you (or an account where you have access, etc) the exchange will not qualify. After selling the property you must identify replacement property within 45 days (EXACT property with legal description) and take posession of replacement property within 180 days.
Hopefully this helps. The IRS website has a publication on like-kind exchanges which may help you. You can download here: http://www.irs.gov/publications/p544/ch01.html#d0e2447
Residence loans are normally a longer term, up to 30 years, and a lower rate.
So if you have a investment property that you have now decided to make you primary residence I would check with the bank and see if you could refi it. It will probably save you money. However you are not required to.
As for doing it the other way primary residence to investment property? I know several people that will buy a home fit it up while living in it for the required 2 or 3 years and then turn it in to a rental home and buy another home.
Tenerife or the Caribbean will always be around.
80/20 loan – interest only on the investment property.
buy it is the best time to buy!
why?
because the population is increasing by 100 thousand per year.
and less than 500,000 units are being built and would be ready between 2009 and 2012.
(with 100% ocupancy in all properties nowadays, it show a shortege in 2006 to 2010 and meet supply in 2011 and 2012.)*. current population is 1.4 million
any way owning a property in any place is the best for long term investment.