Multifamily Property Analyzer

Synopsis

Real estate can be a rewarding investment if you find the right property at a reasonable price. But how to know which deal is perfect? Our Multifamily Property Analyzer spreadsheet walks you through every aspect of the deal, considers income, expenses, acquisition costs, mortgage expenses, and preferred exit strategy, and helps you make the most calculated decision.

Questions and answers

How does the age of a property affect its investment potential?

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The age of a property can significantly affect its investment potential. Older properties may have more character and charm, but they may also require more maintenance and repairs, which can eat into your profits. On the other hand, newer properties may be more expensive to purchase, but they may also attract higher rents and require less maintenance. However, the location, condition, and market demand for a property can often be more important factors in its investment potential than its age.

What are the legal considerations when investing in real estate?

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Legal considerations when investing in real estate include understanding property laws, zoning laws, tax laws, and any potential legal disputes related to the property. It's also important to consider the legal aspects of any contracts involved in the purchase, such as the purchase agreement, mortgage agreement, and any lease agreements if the property will be rented out.

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Sheets highlights

Use this sheet to list and examine all your expenses. These may include utilities, employee payroll, property tax, insurance, management, cleaning and general upkeep, and other types of expenses you might have.

Calculating your return on investment is as important as calculating property expenses. This tab covers all the basic factors. For more on how to close the sale, check out our Secrets of Closing the Sale book summary.

Application

Real estate brokers from a real estate investing resource, BiggerPocket, list the following steps as vital for successfully analyzing a multifamily property deal:

• Build curiosity – in this stage, ask yourself these questions: Why does the property have such a high vacancy rate? Why is the owner choosing now to sell? Does the property have the potential to raise rent in the near future?
• Analyze the deal using the seller's numbers – in your spreadsheet, run a property analysis based on the numbers you have given in the Offering Memorandum. Most likely, you will have access to two sets of numbers: the current property income plus expenses and the proforma income plus expenses.
• Analyze the deal using historical operating data (a.k.a Annual Property Operating Data) – these financials include Property Rent Roll and Annual YTD Profit and Loss Statement.
• Analyze from a proforma perspective – in this stage, you look at the property as if you were already the owner of it. Begin by adding 12 months' worth of categories to your spreadsheet for projected income, expenses, capital expenditures and debt services.

Statistics

According to CB Richard Ellis Group, Inc. (CBRE ), these are the numbers and facts to consider:

• Because of slower economic growth in 2022 and 2023, apartment demand in the U.S. is projected at 240,000 units in 2020.
• Millennials continue to move into homeownership at a modest pace due to affordability issues, but multifamily demand remains sufficient enough.
• New York Metro's 9.2% year-over-year (YoY) drop in multifamily investment was partly caused by the implementation of new rent control regulations.
• Greater Los Angeles had a 9.8% drop in investment YoY, but the San Francisco Bay Area had a 7.4% increase.
• Buying or building in the suburbs remains the best bet based on market performance and investment returns.
• Investors and developers should consider smaller metros – under 2 million population.

Expert advice

It never hurts a leader to be real-estate savvy, and according to Harvard Business Review, these are the five things every leader should know:

1. Manage the portfolio – a company's portfolio of real estate holdings should be more valuable to the enterprise than the sum of its individual sites. For this to happen, leaders need a "snapshot" of the company's footprint, including the locations, the land and building types, the utilization and condition of major facilities, the lease terms and operating costs and the financial and environmental risks. In addition, they need a dynamic picture of where corporate strategy is driving their real estate holdings.
2. Build in flexibility – this includes financial (leasing instead of owning), physical (designing modular space) and organizational (redistributing work) flexibility.
3. Cultivate intelligence – leaders should not rely on their intuition and must always strive to obtain real estate intelligence: accurate data, synthesized into relevant information, interpreted in the context of corporate and competitive realities.
4. Team up with professionals – for example, the industry leaders – CBRE, Colliers, and Jones Lang LaSalle and other providers – make it possible for you to outsource the management of the entire value chain: from short-term leases to multiyear development projects.
5. Embrace sustainability – Bank of America and Hearst Corporation in New York nailed this one with their newer properties, showing the possibilities of green business real estate as their buildings fit closely to the city's the transportation and utility grids, shrink parking requirements, reduce auto emissions and place little new strain on water and power systems. If you want to promote your own building's sustainability, then check out our Sustainability Report presentation template for the tools you need to shine.