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.
Multifamily Investment Analysis
Risks To Watch out
- Operating Costs
- Renovation / Maintenance Cost
- Unforeseen Economic Conditions
- Exit Value
Benefits To Look For
- Decrease Operating cost
- Renovation Rental Premiums
- Rental Growth
- Location Development
- Cap Rate Compression
Multifamily Expense and Revenue Drivers
- Unit Mix Modelling & Weighted Averages
- Rent Growth Analysis
- Rent Vs Buy Analysis
- Vacancy Analysis
Multifamily Expense Drivers
- Operating Expense
- Property Management Fees
- Marketing and turnover expenses
- R&M and contact services
- Utilities and reimbursement