Aligning your wishlist with your financing capabilities may present itself as a potentially serious barrier to finding multifamily real estate investing opportunities. This is especially true if you are just beginning your investing career with a small portfolio and limited credit record. That said, one way to reach your goals may very well be to join forces with a large investor, such as a private equity company, rather than pursuing opportunities on your own.
The Allure of Multifamily Real Estate Investing Opportunities
There is opportunity everywhere, but it likely involves hard work and discipline. This may seem like hyperbole or starry-eyed naivete, but people create prosperity all the time and society has trained us to respect and admire them for it. Some people hold two jobs, others run side businesses or deny themselves pleasures to pay for their children’s educations. Such drive is so common that there’s a word for it: bootstrapping. If you are an investor starting out with little or no capital, you may need to get creative to make your first investment. You could live in half of your FHA-financed duplex, you may need to bootstrap, or you could work longer hours contributing “sweat equity”. You might even find some form of alternative financing for your purchase, such as a bridge loan or a peer-to-peer loan.
Before you can do anything, you’ll also need to develop a business plan that defines your long-term strategy. You’ll need to build a sizable knowledge base, because you’ll have to learn how to find and value multifamily real estate investing opportunities that conform to your business plan. This includes:
This is not an exhaustive list of skills you need for the success of your investment. Property management is highly demanding and time-consuming. If you are inexperienced as a property manager, there is a lot to learn and the mistakes you make in the process of acquiring these skills can be costly. If you choose to manage the property yourself, your income is no longer passive; while you might still make new investments, you now have a job other than being an investor. It could take up time that you could use more profitably on asset management.
Multifamily Real Estate as a Managed Asset
Just as acting as your own property manager may have the effect of limiting your further investment activity by taking up your time, you may also find that choosing which properties to invest in by yourself may limit your future returns. Because of the tremendous costs involved in the development of large communities and the complexity of managing them, multifamily real estate investing is dominated by professional investors with large staffs of specialists.
As an alternative to investing in one or more multifamily properties and managing everything yourself, consider partnering with a private equity company, such as a real estate investment management firm. This may give you access to superior investment properties that are unavailable to investors acting alone, as well as high-quality property and asset management services.
At CWS Capital Partners, we are a fully integrated multifamily real estate investment management firm that offers everything from due diligence and multifamily real estate valuation to transaction support and property management. We specialize in assisting our clients with 1031 exchanges, acquisitions, repositioning, and development. We also own and manage luxury multifamily investment communities in major markets around the country and employ a team of experts who can help you hone your investment strategy.
For more articles like this one, check out our investment strategy blog posts.
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The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.
All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.
Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.
Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.