Multifamily investing is the preferred investment vehicle for building massive wealth quickly. So what do you need to know about investing?
#1 — Who Is on The General Partnership Team?
A general partnership is a group of knowledgeable and skilled investors. The investors research, locate, analyze, and organize solid multi-family deals for you to invest in.
Here are some questions to consider asking the partners before you invest.
How many deals have you done to date? It’s important to know that the General Partnership team has expert knowledge and experience. You rely on your team to handle all the complexities and moving parts of a multi-family deal with ease.
Have you structured a similar-sized deal before? A small multi-family deal—like a duplex or quadplex—is vastly different from a large apartment complex with over 100 rental units. Make sure the General Partnership team has experience in structuring similar deals to the one you are looking to invest in.
Are the general partners investing in the deal? In most cases, the General Partnership team puts down the risk capital to acquire the deal, including all the due diligence costs. It’s essential to know the General Partnership team has “skin in the game” and is investing their own money alongside yours.
Knowing the answers to these questions should help you feel more confident in investing in the multifamily deal that the General Partnership team organizes and executes.
#2 — Who Is the Property Manager?
The property management company is an extension of the General Partnership team. They assist with the due diligence process, which means taking care of all the following:
Sharing valuable information about the neighborhood demographics—the investment property and its surrounding properties
Providing detailed reports to the General Partnership team
Knowing that the General Partnership team is using a property management company that manages other properties in the submarket (general area) should help you feel confident in taking the next step to investing in multifamily.
#3 — What Is the Exit Strategy?
Most apartment deals have a plan to hold for three to seven years and then look for an exit strategy that makes the best financial sense. Over those years, you usually receive income from your investment every quarter. However, the exit strategy is a way to get your initial investment back—plus some extra profit. It is essential to know how these strategies affect you as an investor. Here are two crucial factors to understand with the exit strategy:
Refinancing—When improvements are made to the property—in other words, added value—refinancing gives the opportunity to capture the equity that has been gained.
Selling—Sometimes, it makes more sense to sell the property and get all your money out of the deal. As with any other real estate deal, the General Partnership team may decide to sell the property.
Each deal is structured differently, so you will need to know the specifics and how it affects you.
Parting with your money comes with a plethora of questions and emotions - we get it! Hopefully, the information above gives you peace of mind. We hope that it leaves you feeling equipped and excited to jump into the next multi-family investment opportunity.
Just for fun, here are three useful and exciting things to note about multifamily investing:
Multifamily property investments—for the most part—are recession and pandemic-resistant investing. During the height of Covid-19, we still managed to collect over 90% of rents.
B and C class apartments are historically resistant to recessions. Why? During hard times, people need more affordable living and prefer these type of complexes.
Most General Partners offer a preferred return. This means you get paid FIRST. General partners do not make money until you make at least an 7 percent return. That’s pretty comforting, right?
Mo2 Investments is a Multifamily Real Estate Investment Firm. We carefully acquire and manage large multifamily apartment buildings in markets with a strong economy, that show consistent job growth. This will allow us to provide a strong return to our investing partners. If you are interested in learning more, schedule a 1 on 1 call now. We would love to brainstorm and see how multifamily can benefit you!