I recently returned from a Real Estate Investment Network (REIN Canada) sponsored Multi-Family Real Estate Workshop. While REIN has typically focused on educating new and experienced investors on various smaller property investment techniques, this event was requested by REIN members who are seeking to add apartment buildings to their portfolios.
Don Campbell, and an impressive line-up of top investors and experts, produced an excellent workshop full of real life examples, technical tools and evaluation techniques enabling the over 700 attendees to see the nuances and potential upsides of apartment investing.
I have read that 7 out of 10 millionaires have made their money in real estate but that the truly wealthy investors focus on commercial real estate, in particular multi-family properties (also known as multi-units or apartments).
Clearly from the REIN workshop, and my own studies, investing in apartment buildings can be a daunting task. If you have invested in small single family homes to say 4-plexes you will find the process of buying a commercial apartment significantly more challenging on numerous levels.
Sticker shock will be the most obvious, not so much the per door cost (price paid per each unit in the apartment) but rather the upfront costs of acquisition. Loan application fees can be substantial along with building inspection costs, environmental reports, engineering reports and the list goes on. But don’t let this scare you as these are just the cost of doing business and are certainly calculated in your financial analysis of the opportunity.
Clearly investing in apartments requires a whole new level of thinking and certainly a different level of experts on your team. Your lawyer should be well qualified in both commercial real estate and relevant incorporation strategies. Your financial wealth advisor and/or accountant should have relevant experience with financial analysis and tax strategies around apartment holdings.
You will need a skilled building inspector and engineering company to aid in the physical evaluation of the building (their reports are very important in your negotiations with the seller). An experienced “commercial” mortgage broker with multiple sources of money for deals is essential. Clearly with a personal bias, a full-time “commercial only” Realtor who is also a real estate investor is needed for initial searches and evaluations as well as coordination and negotiation.
Whether you are a novice investor, a seasoned property owner, or you are just looking for alternate investment portfolio opportunities, educate yourself on multi-family investment opportunities as they may be your path to real wealth. In all transactions use your qualified professionals for advice.
In future post we will look in some detail at the opportunities and techniques of multi-family investing. I encourage you to assemble your team, start your research and make informed decisions.
