The CCIM Institute’s magazine, “Commercial Investment Real Estate” reports the following:

“The strongest net effective rent gains in history may occur between 2011 and 2015 as 75 million echo boomers finally can afford to strike out on their own, says RREEF Research.  This pent-up demand along with a below-average supply, limited by financing constraints and fewer construction starts in 2010 and 2011, will boost rents quickly.”

The Phoenix market has depressed pricing for multifamily, especially the smaller properties that saw a huge speculative run up during the recent boom.

With the depressed pricing, high cap rates and the coming “pent up demand” maybe now and the next year or two will be a rare opportunity with a quick payoff.  It’s sure starting to look this way.

The purchase of an apartment building can be overwhelming but once you have made the decision to either start with a multifamily building, move up via a 1031 exchange from houses or add to your portfolio of houses then it gets easier.  There is a lot of information, property and contract needs and terminology which differs from houses: it’s not that different on the one hand and its very different on the other. 

While a rental house can be small hobby or easy investment an apartment building is a business and the scale of it can quickly become a burden if mismanaged.   The same attention must first be paid to buying a property as later managing it.  There is much to review and know: the lack of understanding of certain documents or the consequences of not obtaining certain documents and not doing specific inspections and due diligence can make a good investment bad and an investor can end up in a completely different situation then intended.

For this reason a multifamily investor needs to have advisers whom know the multifamily market, the properties, areas and even better an adviser, a Realtor who owns multifamily properties or has owned them in recent times.

Besides having a strong team of advisers an investor should firs start with some of the steps outlined below.

1) Educate Yourself  

It’s very important to educate yourself about the buying process, analysis process and the running or a business.  A clear understanding of how the business works will help make it a better investment or maybe even prevent you from buying if learn that it is not for you.  The vital key is to base your education on relevant information and data coming from experienced sources not a relative or friend who heard a story.  There are investment associations in many parts of the county. 

In Arizona there is AZREIA, where you can find like minded experienced persons, educational classes and support.  Don’t just reach for the first book you see.  There are plenty of gurus out there that have not practiced what they tech nor done any real estate transactions in years.

2)  Build a team including a Qualified Commercial Realtor —

You don’t need a Realtor to help you with your investment, just as you don’t need a lawyer, you don’t need to do inspections and you don’t even need to buy title insurance if you pay cash but prudence would prevent most people from being so reckless. 

A qualified Realtor, especially a commercial Realtor, especially a commercial Realtor who is a CCIM (Certified Commercial Investment Member) and especially one who has the former qualifications while also having hands on experience as an owner him or herself.   There is nothing like the hands on experience and the representation of a third party to help with making a sound investment. 

Representation will help you in multiple ways in not only educating yourself with the process and inner workings of the buying and running process of the property but being represented by a qualified person means a cleaner and smoother process.

3) Find Apartment Building Financing —

Financing! indeed.  While the property is important and unless your paying cash then the financing you obtain to secure the property is just as important and often more important then the property itself. 

It’s not only about the ability to get financing but they type.  I won’t bore you with too many details but you should explore them all before you make the purchase or even seek a property.  Analyze the financing just as much as the property, with the options cost and analysis and risk.

4) Look At Many Apartment Building Properties —

When search for properties and consider any property see your exit strategy.  Lots of things change in the time of ownership the longer you own it but you can always have an exit strategy even if it changes.  Which ever strategy you have get to know the good the bad: the prime and bad neighborhoods: where is growth in population going to help or hurt you: what is going on in a neighborhood.  It’s only buy getting into the neighborhoods and properties the you’ll get to know the business you’re about to buy.

When you have the tools and knowledge necessary to proceed with the investment and you have decided that it’s something for you: do it! 

I often see investors who are perpetually learning and analyzing but never actually put in an offer on a property or purchase one: this is sometimes after spending years and tens of thousands of dollars learning.  If you are careful and have good advisement and you don’t let your emotions decide then in more cases then not you’ll do just fine.  You should not be afraid of making as mistake: there is risk involved but at least in real estate you can control the bulk of the risk or at lease mitigate it.