If you are thinking about investing in luxury multifamily properties, here are five tips to consider from CWS real estate advisors. These suggestions will help you invest comfortably and with assurance. Experience and knowledge are indispensable when you are investing, and getting the best possible guidance for your investment decisions is an important first step in the process.
1. Luxury multifamily real estate investors should set their sights on the long-term horizon.
Investments are made after considering various strategies. Depending on the investment type and objectives, an investor may target rapid growth, immediate income, or capital preservation. Most real estate advisors believe that luxury multifamily real estate investing is ideal for capital preservation—the slow yet steady growth of assets. Don’t let the terminology confuse you. This strategy produces a return on investment, too. The return is often smaller than other types of investments might provide, but it’s enduring and can become significant over a long period of time. Multifamily property investing may also have a lower level of risk than other investments.
An investor may use a capital preservation strategy for several purposes. Capital preservation assets can be used to balance an investment portfolio that’s risk-heavy, for example. The strategy is also an effective way to simply hold funds that are earmarked for later use. For instance, it is a popular way to build up retirement funds or savings to buy a house or fund a college education.
2. Invest with a company that has a long history of success and a strong cash position.
In real estate, past performance doesn't always predict future results. But when it comes to choosing a top real estate investment company, a long and positive track record inspires confidence. There are many factors to consider when choosing an investment firm, but performance is the most important because it plays into how satisfied you’ll ultimately be with the relationship.
Having a strong cash position and other highly liquid assets shows that an investment company is prosperous and can cover its obligations. While an excessive amount of unused cash might signal that a company’s assets are not being put to the best possible use, maintaining a sizable cash supply allows investment company managers to move quickly on exceptional opportunities.
3. The firm’s principals should be knowledgeable and trustworthy, as evidenced by a track record of good stewardship of investor’s capital.
A financial company’s principal shareholders make the decisions that shape the firm and its policies. Their reputations, therefore, should be stellar to inspire the confidence of new multifamily property investors. If an investor has not been directed to the firm by a personal or professional acquaintance, then the company should be able to provide professional references to support its alignment with its equity partners. A company’s unwillingness to do so should be considered a red flag.
4. Choose an investment firm that invests in deals alongside its investors to align interests.
Alignment of interests means that all parties in a transaction benefit from the successful outcome of a deal. When an investment firm invests in the same properties as its clients, it demonstrates support in the most practical way possible, thereby assuring investors that their financial interests are well protected. Aligning interests is a sign of good faith; it does not increase the return on your investment, but it sends a strong message.
5. Don’t chase deals where the numbers don't make sense.
Luxury multifamily property investing requires not only capital, but also a good deal of skills and deep financial and industry knowledge. Investors should be well versed in economics and mathematics, understand how the banking system works, and have expert knowledge of the area in which the property is located. The importance of knowing the local market cannot be overstated. In some areas, downtown is preferable for investment; in others, the suburbs or individual neighborhoods are recommended. Negotiating skills are also essential to success, and they are only obtained through practice. An investor should come to the table expecting challenging talks and be prepared to strongly defend his or her interests.
Investment companies exist to help their clients make investment decisions. Their principals and teams have the experience and prowess to act quickly and correctly. If a luxury multifamily property investor is unsure of his or her expertise, consulting a real estate investment advisor is strongly recommended.
At CWS Capital Partners, we are a fully integrated multifamily real estate investment management firm that offers everything from due diligence and risk management 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. Contact us today to discuss your next investment.
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.