Here’s what an expert is seeing for the second half of 2018 that can help you navigate your next—or first—building investment
Many investment firms are changing their investor pools. Where once all investors were institutional partners (think: billion-dollar funds), many are now choosing a smaller group of 20 or so accredited investors. This could bode well for those considering investing in the multifamily market. Here’s what we’re seeing for the second half of 2018 that can help you navigate your next—or first—building investment.
EXPECT TO PAY MORE FOR MATERIALS AND SUBS
Your multifamily building purchase will no doubt include capital improvements. Keep in mind that materials are at a premium right now, and prices for drywall and sheets of plywood have gone up demonstratively because of the high demand for housing. Construction labor is also in high demand, and subcontractors can basically go wherever they want, make their money and live where they please. It’s a construction worker’s market right now.
As a result of these dynamics, we’re looking to buy properties 10 years old or newer in markets that have good bones—meaning properties with cosmetic value and that only need light upgrades. To mitigate materials and construction prices on projects and value-add items, be sure to factor in labor and payroll.
A MORE MATURE CYCLE
We’re now working with more high net worth and more accredited investors, rather than fund or institutional partners. Part of why there’s such a demand for real estate is that many of our potential partners want to be more diversified outside the stock market. True, these partners are dealing in real estate—given that it’s a tangible asset—but there’s also a tremendous tax advantage. This might be a good reason to move a significant portion of your portfolios over to real estate.
VERIFY, VERIFY AND CONTROL
You need to be accredited or have high net worth, and there needs to be a good fit. For instance, we look for investors that share our philosophies about real estate and growth. That said, we always maintain control of the deal, regardless of how much money our partners invested. Through this control, we can monitor the investment and help it stay on track. Remember: When investing in properties, partnering with a knowledgeable, experienced firm is key.
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