Multi-Family Commercial Real Estate

Multi Family Commercial Real Estate

Specialties Multi Family

Some of the Considerations and Drivers of Commercial Real Estate for MULTI-FAMILY:

This sector has been in particular favor since the major financial crisis and resulting great recession of recent years.  Some of the contributing factors to this ‘favorite sector’ investment trend where:  the unique availability to finance via government sponsored enterprise, Freddie Mac and Fannie Mae; public perception of macro inflationary hedge correlation; projected growth deriving form displaced home owners; new and/or expanded interest by institutional investment.  The effect on supply and demand has resulted in significantly tightened CAP rates and movement into tertiary markets with less desirable property profiles.  The traditional investment metrics include:

  • Pro Forma Valuation
  • Rental revenue
  • Occupancy and break-even metrics – rent increase feasibility
  • Expenses – careful examination of itemization, assessment of expense/revenue ratios…expenses/square foot. Are they appropriate/believable?
  • Quality of tenant and lease documents
  • Revenue trends
  • Deferred maintenance, cost and urgency
  • Other income sources or opportunity – laundry, resale of services/amenities
  • Location – What part of the metropolitan area is it in? What kind of visibility does it have from major road(s)? What kind of access does it have from major road(s)? How far to, and what is quality of, grocery shopping? If tenants with children are sought, what are the schools and their reputations? What are the advantages and disadvantages of the neighborhood? What rents are charged by competing rentals in the neighborhood? Is this a declining or thriving neighborhood?
  • Competition – Who are the competitors? What are their rental rates? What are their advantages? What are their disadvantages?
  • Floorplan, Finishes and IT – is it up to current standards and/or expectations of prospective tenants. Compare and contrast to nearby comps. If not competitively positioned, is a floorplan/finish/IT upgrade feasible? Cost vs. additional revenue (both in increased rents and occupancy)
  • Parking & Common areas and amenities – type, quality, quantity? Meeting target market expectation? Meet code?