Investment Strategy in MultiFamily Building!
Multifamily investment is and has always been one of the most sought-after real estate classes for investors since it generates both cash flow and long-term capital gain. Unlike an investment in a single rental property, multifamily properties need to go through development stages to maximize the potential return on the investment. The process has similarities to land development, as both involve adding value to the property. Below is the highlighting of the various stages involved in developing a multifamily rental property and the potential benefits it can bring:
1. Acquisition: This stage involves acquiring the multifamily property. You can secure financing through private lenders if the property is underperforming or requires significant improvements. Alternatively, you may consider options like vendor take- back financing or private sources.
2. Improving the Property: Once you acquire the property, the focus shifts to improving it. This can involve various actions, such as increasing income by replacing tenants or renovating the property. The goal is to enhance its value and attractiveness.
3. Stabilization: During this stage, you aim to stabilize the property by increasing occupancy rates. Ideally, you want to have at least 75% of the units occupied or close to being rented out at market rates. This increased occupancy and value enhancement set the stage for the next step.
4. Refinancing: After adding value to the property and stabilizing it, you can consider refinancing options. If the building meets some criteria such as accessibility, energy efficiency, and affordability, conventional financing sources, such as banks, or government programs like the Canada Mortgage and Housing Corporation (CMHC), may provide refinancing opportunities. CMHC programs can offer favourable terms such as low rates, and higher loans to value up to 95% as well as longer amortization up to 50 years. This would have a huge contribution to improved cash flow and potential long-term capital gains.
We are offering services to guide investors through each of these stages, including property analysis, repositioning, and refinancing.
Contact us to show you the road map and how you can take advantage of the opportunities laid under this type of asset class.
Please note that investing in real estate involves risks, and it's essential to conduct thorough research and consult with professionals before making any investment decisions.