Aviva Senior Living | LoopNet: 5 Multifamily Trends to Watch in 2021

LoopNet: 5 Multifamily Trends to Watch in 2021 LoopNet: 5 Multifamily Trends to Watch in 2021

LoopNet: 5 Multifamily Trends to Watch in 2021

What to Look for in a Post-Pandemic Multifamily Investment Property – by Dawn Allcot

The pandemic changed virtually every aspect of life for Americans, including how we shop, the ways our children learn, where we do our work, and — in many cases — our living conditions. The multifamily real estate investment market has also changed substantially since this time one year ago, but some ownership tenets remain, such as the opportunities in value-add properties, the importance of finding the right location, and a focus on supplying tenants what they want in terms of amenities and living space.

“Now is still a great time to buy a multifamily property,” said Nicholas Zolotas, a Realtor at Herrick Lutts Realty Partners in Beverly, Massachusetts. “Each deal has to be taken on a case-by-case basis, but with interest rates being so low and rental demand climbing, even with rising prices you can still achieve a good return.”

As always, he said, purchasing value-add properties where you can renovate to enhance returns is one key path to profitability. But the increased focus on value-add deals is just one of several trends that experts discussed with LoopNet.

Value-Add Properties Provide the Most Opportunities

Unlike the retail sector, which continues to struggle, multifamily commercial properties remain a solid investment, experts said.

“Multifamily [value-add] is the only [sector] I feel confident about right now,” said Cyrus Vaghar of Coldwell-Banker Real Estate in Newton, Massachusetts. “Many developers looking to do mixed-use projects have simply axed the retail on the first floor and are now simply making their buildout a [solely residential] development.”

Most agree that the greatest profit potential exists in value-add buildings, particularly in secondary markets.

We’ve netted fantastic returns for our investors with our strategy of buying value-add properties in burgeoning secondary markets, said Lexi Rich, marketing director for Lloyd Jones, LLC, a multifamily and senior living investment and management firm in Miami. We certainly don’t see this sector of multifamily investment going away any time soon.

Even in areas where rents have plummeted or stagnated, investors who can spruce up a building with well-chosen renovations, such as an updated kitchen with new appliances and finishes or outdoor living space, can draw in tenants quickly and turn a profit.

“Each deal and each market is different,” Rich said. “Generally, we target an ROI of 20% or higher when deciding which value-add initiatives to implement, and then charge a rent premium accordingly once those upgrades are complete.”

She added, “Sometimes, the market calls for a major upgrade package that includes new flooring and quartz countertops, but in other situations, more nuanced upgrades like new cabinet hardware or adding a tile backsplash can make a big difference to refresh a unit and bring in new renters.”

Experts also noted that forward-thinking investors should overhaul properties with the potential for future condo conversions in mind. If you’re investing in Class-B value-add properties, consider upgrades that would permit a profitable sale in the future, said Michelle Mumoli, a broker for Jersey City, New Jersey-based Triplemint, a firm specializing in multifamily and residential new development properties across the state.

She suggested upgrades that can make the units self-sustaining and practical for future condo sales, giving residents greater privacy and more autonomy over their living space.

“Investors should consider gut renovations that may include creating better floor plans, and providing in-unit washer/dryers and tankless water heaters,” she said.

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