multifamily investment strategy

Tips for a Successful Multifamily Investment Strategy

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Multifamily properties are a strong avenue to wealth — and with a number of markets seeing outstanding growth over the past year, this strategy is one that’s too good to pass up. Our guide to multifamily investing tips is your first stop to realizing your investment goals — whether you’re already an experienced investor or are just beginning to explore your options.

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Why Now is a Great Time to Consider Multifamily Investing

Multiple economic factors in key markets have made multifamily properties more appealing to a wider audience than ever before, and it’s easy to see why. With long-term wealth creation potential, soaring demand for housing, and strong rent growth (12.3% year-over-year as of July 2022), this type of asset stands out while others struggle. But in order to succeed, it’s important to carefully consider your multifamily investment strategy.

Here, we’ll go deeper into several reasons why you should get involved in multifamily investing as well as risks and challenges you should proactively consider in order to make the most of your time and resources.

The Advantages of Multifamily Property Investing

Apart from long-term wealth creation, multifamily property investing brings a number of other benefits — just some of which include:

  • Tax advantages — As a multifamily investor, you may be able to take advantage of a number of tax benefits. These include depreciation, management expense deductions, cost segregation, and more. (Note that you should consult your own tax advisor for guidance.)
  • Stability — Multifamily properties are a relatively stable asset class — particularly useful in today’s market. Due to the significant housing shortage, multifamily properties will continue to see strong demand for years to come.
  • Easy entry — You don’t necessarily need to have years of experience and significant financial acumen to get started. That said, there are some common pitfalls that new investors make. Overall, a multifamily investment strategy is a fairly low barrier to entry.

Go deeper: Explore more multifamily investing benefits in our guide here.

Potential Multifamily Investment Strategy Challenges

While the advantages of multifamily investing are many, so too are the potential risks when the investment strategy isn’t planned early and managed efficiently once the deal closes.

  • Management — It’s important to determine whether you’ll be managing the property yourself or if you need to work with a property management company (PMC). If you do the latter, working with a proven, experienced company that you trust is crucial.
  • Raising capital — You will likely need to conduct fundraising up front in order to raise the funds needed to secure financing to buy the property. You’ll need other investors to work with and will need a solution to manage distributions and other financial details on a pro rata basis.
  • Overreaching — This one is important and is a common multifamily investment mistake. Some new investors decide to get a property with a couple hundred units, when they should have purchased a smaller property with which to build experience. Going too large too quickly will result in you being overwhelmed and potential issues with tenants.
  • Your role — Remember that investing in multifamily properties is about more than the investment itself. You’re also taking on people’s livelihoods. Your tenants will depend on you to keep their homes safe and in good working condition. They expect you (or your PMC) to be responsible, accountable, and available.

Find other potential pitfalls: Download your free copy of the multifamily investing tips guide here.

Tips for Multifamily Investing Success

  • Never be satisfied — Always strive to be a better, more informed, and supportive investor. You’ll build stronger relationships with your tenants and partners and will realize more success long-term.
  • Pressure test yourself — Multifamily investments require your time, attention, and resources. Make sure that you’re ready and able to take on this responsibility before proceeding.
  • Start conservatively — Again, don’t bite off more than you can chew. Strive to meet your ROI expectations in a manageable way and scale up when you’re ready and able to do so.
  • Always add value — If you’re considering a multifamily investment strategy purely for wealth creation, you likely won’t see success. Always seek to add value for your partner investors, your tenants, and your team if you have one. This strengthens relationships and can lead to greater participation from other investors in the future.

Invest with Confidence — and with Covercy

Covercy is a commercial real estate (CRE) investment management platform designed specifically for GPs and investors with moderate asset portfolios (think 10-20 assets). Our platform provides the technology investors need to maximize key functions such as fundraising, investor relations, automated distributions, and even banking.

With all of these capabilities, GPs are able to accomplish more, add more value, and better understand the long-term performance of their assets — without the administrative hassles often associated with CRE investing. And it’s ideally suited for investors looking to grow their portfolios through a multifamily investment strategy.

Get a private demo of the platform now.