How can real estate investors find more value in Massachusetts’ hot multifamily market?
While we are still facing slow economic growth and relatively moderate net job growth the need for multifamily housing and investments will only continue to increase. In fact, Yale economist Robert Shiller recently alluded to the fact that this could result in an extended growth cycle of as long as 50 years.
The question for real estate investors today is where and how to find the most value as competition for this class of real estate increases.
6 Ways to Find & Create Value in Mass. Multifamily Investment Properties
1. Where to Invest
Savvy investors looking for commercial real estate acquisition opportunities in MA are increasingly looking outside of Boston and are finding more value in Worcester and the surrounding area including Shrewsbury, Auburn, Northborough and Westborough.
2. Rebuild Cost
Around the country real estate investors will still find many investment properties available for less than rebuild cost. When combined with the current trend in increasing construction activity this helps to lock in value up front.
3. Future Cash Flow
Those looking at opportunities for leasing multifamily property and having a hard time justifying some of today’s cap rates in prime locations also need to keep in mind the time value of money and future benefits of locking in wider cash flow spreads now. Higher rates are bound to come and that means those who wait will not only pay more for commercial real estate but see lower yields due to higher interest.
There are also certainly some advantages to locking in vendor and service provider contracts now. Getting ahead of inflation before services like property management and bookkeeping become more in demand means building relationships and potentially getting more value for less, further increasing net yields.
4. Resale Opportunities
Many newer real estate investors forget to calculate some of the most significant factors which explain why more experienced pros may be paying so much for prime real estate. Think about the compounding effect reselling a property within a few years will have on overall returns. The foreclosure crisis is far from over and that means rents will keep heading up and investors will be increasingly attracted to leasing multifamily.
Plus as Europe and Asia still face lengthy periods of economic and real estate struggles with new additions like Canada to the list of those in crisis, the hunt for yield by foreign investors in the U.S. will only drive up values further.
5. Finding Creative Acquisition Opportunities
Dig deeper and look for opportunities to take down commercial properties as non-performing notes, rather than waiting for them to come to market.
6. Sweat Equity
Of course one of the best benefits of multifamily leasing is the ability to add value at any time by making improvements.