Archive for multifamily
Marketing and advertising, though many use the terms as if they mean the same thing, are really different. Advertising is a function of marketing, but marketing is a broader planned approach to positioning an apartment or multifamily property in the local marketplace.
Advertising includes the ways in which the property is presented to the prospective rental pool in a way that follows the marketing plan.
Marketing for Apartment & Multifamily Properties
Taking some niche examples, what might a marketing plan contain for an apartment or multifamily property? First, it will be identification of the target prospect or renter who would be most likely to want to live in the project.
This includes looking at the “why” that could be location, amenities or size and layout. Once this is determined, a marketing plan can be put into play.
· Taking the top couple of reasons renters would like this property from the research above, examine where these prospects live now, work, and places frequented for entertainment.
· If it’s an age group, this could point out marketing approaches and advertising media later that would appeal, such as focusing on modern and online access for younger, or convenience and ease of access for older prospects.
· Location is easy, as a college or major technology employer that’s providing the prospects can be the main source of tenants, thus a focus for marketing efforts.
Advertising for Successful Apartment & Multifamily Marketing
Once a marketing plan is in place, the methods used to advertise for tenants will be determined based on their ability to reach the best prospects at the lowest cost.
There are a great many ways to advertise apartments & multifamily properties, and just as many differences in reach, cost and results. Media sales people have a job to do, but just taking demographics in a sales presentation at face value could be costly and ineffective.
· Young professionals could be targeted quite well with a website and search engine presence.
· Those same young professionals, as well as college students, use Craigslist a lot, so it’s a great free advertising resource.
· College bulletin boards, and the same for large employers and institutions are another free resource that works.
· Large employer or institution newsletters may offer ad space.
· Of course, all of the traditional media, TV, radio, newspaper, and magazine can be effective. But, have the ad sales person show hard numbers for the number of prospects that fit the marketing plan.
Marketing & advertising for apartment & multifamily properties can be very cost effective with a plan and careful media selection.
I’ll share more with you soon…
Warm Regards,
Karen Hanover, CCIM Candidate
Apartment Education Institute, President
Tagged with: advertising , apartment & multifamily properties , apartments , craigslist , Karen Hanover , marketing , media , multifamily , website
It’s all about cash flow in apartment & multifamily investment. From the valuation of the property with cash flow analysis to the determination of the mortgage amount with cash flow and DSCR (Debt Service Coverage Ratio), it’s the cash flow that determines the value of the deal.
Since property management costs, and the costs of other items on the expense side are controlled by management, it’s crucial to have a good management staff and plan. Without that, it’s easy to see where a commercial foreclosure may become a reality.
Legal and Accounting
Good legal counsel should always be available, whether on retainer or just on-call. From planning and selection of forms for applications and tenant interviews to careful preparation for and performance of the deliveries and documents for eviction, legal help is important. One lawsuit for improper eviction can wipe out a year’s profits.
Accounting isn’t just number-crunching. It’s also tax planning and budgeting to maximize that all-important cash flow. The tax planning can help to subsidize other investments as well. Selection of the right accountant contributes to ongoing management profits throughout the holding period.
Cleaning, Landscaping & General Maintenance
The people hired to clean units between tenants, do landscaping work, as well as general minor maintenance tasks, can set the tone for tenant satisfaction. Arriving home from work to a well-maintained project, with inviting common areas, can contribute to tenant retention, and possibly allow higher rents than competitive properties.
Tenant Relations
Tenant relations encompasses a number of important points of interaction between management and the customer…the tenant. With today’s busy lifestyle, there is little patience on the part of tenants in accepting problems with their home.
From making it easy to reach management with problems, to prompt correction and repairs, tenant satisfaction is critical to profitability. Even if a new one is placed quickly, the loss of a tenant due to management problems increases costs of operation in readying the unit for the new tenant.
Word-of-mouth marketing shouldn’t be undervalued. Happy tenants tell others. They also have friends who will at some point be in the moving mood.
Significant savings in marketing and advertising costs can be attributed to tenants bringing others to the project. Some owners offer a small rent offset as a thank you for a tenant referral. Keeping tenants happy contributes to cash flow.
Apartment & multifamily project management is a significant component on the cost side, but also an important piece of the income side when done properly.
I’ll share more with you soon…
Warm Regards,
Karen Hanover, CCIM Candidate
Apartment Education Institute, President
Tagged with: advertising , apartment & multifamily , apartments , cash flow , Karen Hanover , maintenance , marketing , multifamily , project management , tenants
One misconception that keeps many real estate investors out of the apartment & multifamily property investment markets is that they don’t have the assets or credit worthiness to borrow in this market. True, the amounts of money are larger, and loan amounts and payments are higher as a consequence. But, the criteria lenders use for these types of loans is different.
“Cash flow is king” is a popular saying, and it’s actually quite true in the apartment & multifamily investment lending environment. Borrower credit history, and value of property structures and land take a back seat to cash flow. If the cash flow supports a loan, with enough cash flow to make payments with profits left over, loans can be had.
Cash Flow For Apartment & Multifamily Properties
As the words imply, “cash flow” is going to be the money stream flowing in or out in the operation of an apartment or multifamily investment. As it is cash, all operating expenses should be subtracted from rent income, yielding the net operating income. Once this monthly positive cash flow is calculated, there is a way to determine the approximate amount a lender will loan against the apartment or multifamily apartment.
DSCR – Debt Service Coverage Ratio
Lenders take the net income, or cash flow from operations, and a ratio is calculated to determine the amount of money that can safely be loaned against the apartment & multifamily property. This DSCR is a multiplier indicating the ratio of the loan balance to the cash flow. An example would be an apartment or multifamily investment property that cash flows $45,000 per month, or $540,000 per year. Many lenders want to see the cash flow at 1.25 times the cash flow. In this example, the lender would not want to loan more than $432,000 against the property, as $540,000 is 1.25 times that loan amount.
Anything less than the 1.25 amount would be considered too risky by this lender, as vacancies or other problems could result in a troubled loan. A higher DSCR, such as 1.33 would look better, as the cash flow provides a third more cash each month than the payment. Lower, say 1.15, would not be as good, as the cash flow is only providing a 15% cushion over the loan payment.
Apartment & multifamily investment can be the goal of many more real estate investors once the mechanics of cash flow, DSCR, and lending decisions are understood.
I’ll share more with you soon…
Warm Regards,
Karen Hanover, CCIM Candidate
Apartment Education Institute, President
Tagged with: apartment & multifamily , apartments , cash flow , dscr , investments , Karen Hanover , lending , multifamily
Donald Trump is quoted as saying “If you’re going to be thinking anyway, think big.” Thinking big can take on many forms, and one is thinking about economy of scale as one great reason to be investing in commercial real estate through purchase of apartments and multifamily housing.
Economy of scale wears several hats in apartment and multifamily real estate investment:
· Apartment buying discounts – go to the Home Depot or Lowe’s and tell them you want one refrigerator. You’ll get a good price. But, tell them you want a dozen, and you get a cup of coffee and a special quote.
· Multifamily structure maintenance – If you own a dozen rental homes, you have a dozen roofs with different ages and in different stages of condition. With a single building multifamily property, it’s just one.
· Landscaping and outdoor maintenance – Those dozen yards require trips to each for landscaping, or at least careful watching if you’re leaving it to the tenants to do. The apartment property is in one location, and landscaping and yard services do it all in one trip.
· Cash flows ramp up with more units – The savings already mentioned combine with multiple rental units all in one place to produce much higher cash flows than taking them apart and spreading those twelve units all around town.
· Buying more units is no more of a task – Whether you’re doing a negotiation and transaction for four units or twenty, the effort is the same. The due diligence is concentrated, rather than spread out.
Those all relate to a larger number of units in one place. But, there are benefits in commercial apartment & multifamily investment that are derived from the higher dollar value of the properties as well.
If appreciation of real estate in the area is expected to be 15% over your holding period, would you rather be holding $200,000 worth of property, or $2 million worth? The difference is more than a quarter million dollars in your pocket.
One more benefit that began to show huge promise during the collapse of the housing and mortgage markets beginning in 2007 is the increase in rental demand that comes from homeowners displaced by foreclosure.
Any commercial real estate investment portfolio will be greatly enhanced with the addition of apartment and multifamily properties investment.
I’ll share more with you soon…
Warm Regards,
Karen Hanover, CCIM Candidate
Apartment Education Institute, President
Tagged with: apartment , apartment investment , commercial real estate , commercial real estate investment , Karen Hanover , multifamily
