Insights Sep 6, 2018

4 Top Trends Taking Over Multifamily Property Investments

Investing in multifamily properties has made many people rich. Just look at the bios of America’s millionaires and billionaires, and you’ll find many (maybe even most) of them became wealthy through real estate.

Although the cat’s out of the bag that multi-family real estate investing is a key to wealth, the future still looks bright for new investors. In fact, demand keeps increasing as baby boomers retire and wish to downsize and as millennials continue to job hop and move, making renting an apartment a better option than buying a house.

So there’s no mystery as to why investors choose multi-family property as their investment vehicle. What’s not as well known are the new tech developments associated with multifamily real estate and how they make multifamily investing even more attractive. Let’s explore four of them.

1. Property Management Systems

Multifamily property investors often use a property manager to take care of business. This includes doing the daily tasks that prove to be time-consuming: advertising the property, reviewing applications, showing units, collecting rent, and keeping up with maintenance duties. The downside, of course, is that hiring a property management company isn’t free and takes away some of your profits. Technology makes it easier to manage your own multifamily property, allowing you to keep more of your money.

Some platforms to consider include the following:

Cozy: You can market your rentals, advertise your vacancies, have your tenants pay rent, and communicate about maintenance requests through this platform made for both landlords and tenants to use.

Buildium: This platform offers accounting, business operations, and leasing functions. It includes features such as tenant screening, rent collection, and late-fee notices.

BuildingEngines: This app helps you retain tenants, extend equipment life, protect your assets, and make informed decisions.

2. Lending Marketplaces

Most multifamily investors traditionally had to approach various banks, use their own relationships, or go through a mortgage broker to source debt funding for their commercial multifamily properties with 5+ units. These options were labor-intensive, required a lot of back and forth with communications and paperwork, and could take months to get multiple offers and negotiate terms.  This process was especially complicated for those investing in different geographies because most banks have specific geographic lending footprints.

Now there are online marketplaces that simplify this process and make it a lot easier for borrowers to find interested lenders, receive, compare and negotiate the best offers within days instead of weeks, regardless of the where the property is located.

Online platforms like RealAtom, use technology to connect borrowers with the best lenders that are looking for loans, and provide tools to help them compare, negotiate and close their loan with the best terms.  Borrowers can create loan requests themselves through the marketplace, which is secure, and only shares loan information with the best lenders that are matched through strict lending criteria.

By simplifying the ability to source debt capital for multifamily investment projects, RealAtom saves investors time and money which they can put back into their projects where they can make more money.

3. Automated Valuation Models (AVM)

There’s no need for you to possess an advanced math degree when you can use technology to value properties for you. The importance of property valuation extends beyond what you stand to make on any property; it also extends to your lender and whether you will be granted the loan. So you need to get the numbers right not only to make money but to acquire the funds to do so.

The way investors typically determine value is to look at the possible cash flow of a property, determine its cap rate, and compare recent sales. As most investors know, the numbers they come up with can vary wildly based on the information they put in. For example, a property’s location or amenities can skew results.

Using a machine, or an automated valuation model (AVM), to get a valuation is still new in the commercial real estate industry, but it’s been used in residential single-family homes for a while now. Think Zillow’s Zestimate tool, which sets a value for a home and lets you know whether that home’s value is rising or falling.

The first AVM for multifamily real estate tested did not use cap rates or comps. It instead used different methods to determine a property’s value, such as a decision tree model, and it proved to be right most of the time. There was only a 9 percent error rate when the AVM determined a property’s value compared with a 12 percent error rate when humans did the valuing. Look for AVMs to replace current appraisal methods in the future.

4. Virtual Reality

Virtual reality (VR) by far surpasses simply looking at real estate photos online. VR immerses users in the real estate experience, placing them in a 3D virtual world. Potential renters from anywhere in the world will be able to “walk through” units virtually, and it will seem, to them, as if they are really inside, touring a property. Potential renters can interact with the space, even moving furnishings around.

VR isn’t yet being used to its full potential for commercial real estate, but it can and will change the way people interact with properties. Although this technology is expensive and somewhat of a rarity now in the commercial property realm, once potential tenants come to expect it, VR will become a commonplace way to attract tenants.

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