What is multifamily property?

A multifamily property is any property that has more than one unit. It is an excellent way for first-time investors to enter the rental market, as they are typically financed by banks in the same way as are single family homes.

Advantages of Investing

  • A steady source of cash flow with predictable rent payments, especially in a robust and growing property market like Qatar.
  • Reduced risks compared to other real estate asset classes like commercial properties because people need somewhere to live even during an economic downturn.

Common Risks of Investing

  • Variable operating costs and down payment required by lenders, depending on location.
  • High renovation and maintenance costs due to the property size and total number of occupants
  • Capital stack structure 
  • Syndications and fee structures
  • Marketing and Turnover Expenses

Valuation and Underwriting

  • Identifying the targeted properties
  • Initial underwriting, which may include current rent-roll, total number of leased units, total number of tenants, total amount of rent generated by the property, floor plans and layouts, current operating expenses, and leases lengths
  • Visiting the property to inspect its condition, location and trading area in order to plan maintenance needs, renovation or any other improvements.
  • Doing market research and refining underwriting, including debt quotes, updated rental market trends, updated rent roll/T-12, and revised renovation budgets.

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Multifamily Investment Analysis

Risks To Watch out

  • Operating Costs
  • Renovation / Maintenance Cost
  • Vacancy
  • Unforeseen Economic Conditions
  • Exit Value  

Deal Opportunities

Benefits To Look For

  • Decrease Operating cost
  • Renovation Rental Premiums
  • Rental Growth
  • Location Development
  • Cap Rate Compression

Multifamily Expense and Revenue Drivers

Revenue
  • Unit Mix Modelling & Weighted Averages 
  • Rent Growth Analysis 
  • Rent Vs Buy Analysis 
  • Vacancy Analysis 

Multifamily Expense Drivers

Expenses
  • Operating Expense
  • Property Management Fees
  • Marketing and turnover expenses 
  • R&M and contact services 
  • Utilities and reimbursement

 

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