Multi-family investment offers a great opportunity for generating a solid income stream, and building equity to help secure your financial future. While not quite “recession proof”, the multi-family sector has proven to maintain values better than other types of real estate. Investor confidence is driven by the ongoing belief that a decline in home ownership, and changing demographic trends, will continue to drive demand for apartments and keep fundamentals strong. The income growth potential is relatively high for multifamily (versus office, industrial, and retail properties), which along with the relatively low risk associated with apartments, makes it a particularly attractive investment option.
While apartments are often considered one of the “safest” types of real estate investment, there are always risks associated with owning real estate, as with any type of investment. However, there are important steps that owners can take to help avoid and/or mitigate some of these risks. Thorough due diligence, prior to purchasing a building, can provide valuable information that may influence your buying decision. Unfortunately, many investors limit their initial due diligence to a cursory review of the operating history, and a casual “walk through” inspection of the property. It is critical to know what you are buying, and to make an informed decision as to any risk factors that you may be exposed to as an owner.
In addition to a general property condition assessment, DSG recommends that prospective buyers obtain a comprehensive due diligence report from a qualified expert that includes a Phase I Environmental Site Assessment. The presence of environmental risk factors, such as asbestos or lead-based paint, can add significant costs to building maintenance or upgrades. It is important to choose an inspection company that is knowledgeable in environmental risks, as opposed to simply hiring a building contractor who may not be qualified to identify these existing conditions.
For those who already own multi-family properties, it is equally important to take steps to protect your investment. Is your apartment building more than 10 years old? If so, in the event of a fire, your local jurisdiction may require that the entire building be brought up to current building and safety codes, at potential significant expense to you, the building owner. Your current insurance policy may not cover this type of expense, and even if it does, the limit may not be adequate to cover the full cost of the upgrade. Along with other insurable risks apartment owners face, learn how to protect your investment by understanding how Building Ordinance coverage works, and how to determine proper insurance limits for your property.
We will be discussing these important topics, and more, at the next session of the Apartment Investor Academy, on August 24th, at the Hampton Inn in Camarillo. The Apartment Investor Academy is a quarterly Seminar Series for current & prospective apartment owners in Coastal Southern California. The goal of the Apartment Investor Academy is to provide Investors with tools that will help enhance the profitability and security of investment properties.
The 8/24 event, Protecting Your Assets, will feature presentations by guest speakers who are experts in their fields. Stephen Masek, President of Masek Consulting Services, is a highly regarded environmental expert, who will be joined by insurance expert, David Shore, a Managing Member of TWIW Insurance Services.
There is no charge for participation in the Apartment Investor Academy, but registration is required. For more information, please click HERE, or contact Emily Barany: Emily@DyerSheehan.com or (805) 653-8100.