The Top 10 Reasons to Invest in Multifamily Real Estate

We all know we should be investing in real estate, so what is holding you back?

Our team has put together the “Top 10 Reasons to Invest in Multifamily” as a guide for you.

 

 

We highlight some of the many benefits that come with investing in multifamily real estate gathered from our years of experience.

 

 

 

Click HERE to see the full report

 

 

Feel free to reach out to the team if you’d like to learn more, or find more information on how to invest HERE.

Webinar on Multifamily Execution and Adaption – A Case Study

Now available: If you’re considering investing in multifamily properties, this webinar will illustrate how our strategy and execution make our investments a success.

We show you the numbers and explain how we’ve delivered value creation in our first fund.

 

A replay of the live event can be found HERE

 

 

As always, please feel free to reach out to the team if you have any questions or would like to discuss further or book a call with the team HERE

We’d be happy to talk about our investment offering, and how you can benefit from real estate exposure in your investment portfolio that provides you with a completely passive stream of income.

Inside Large Scale Multifamily Investment Strategies

In our latest Webinar, we shared insights into five large scale multifamily investment strategies

If you were unable to attend, or wanted to access the presentation and watch a video replay, the links can be found below.

The full presentation slide deck can be found HERE

A replay of the live event can be found HERE

 

There are a wide range of strategies investors follow when investing in apartment complexes. In this webinar we run through several different approaches investors can take when assessing a multifamily investment.

From new properties to old, we will break down the pros and cons of each and give insight that prospective investors can use to understand a sponsor’s approach and make an informed investment decision.

We cover 5 different strategies investors use when approaching large scale multifamily investments:

> Ground Up Development

> Core

> Momentum

> Government Subsidized Housing

> Value Add

 

As always, please feel free to reach out to the team if you have any questions or would like to discuss further or book a call with the team HERE

We’d be happy to talk about our investment offering, and how you can benefit from real estate exposure in your investment portfolio that provides you with a completely passive stream of income.

Webinar: Why Multifamily Investments? Slide Deck and Replay Available

In our latest Webinar, we shared insights on the many aspects of investing in multifamily properties.

We thought it would be useful to our readers who were not able to attend to read through the presentation.

 

The full presentation slide deck can be found HERE

A replay of the live event can be found HERE

In this webinar, we cover:

What is Multifamily?

Classes of Multifamily

Benefits of Multifamily

How to pick the right investment

 

As always, please feel free to reach out to the team if you have any questions or would like to discuss further or book a call with the team HERE

 

Yankee Capital Partners Announces the Launch of the YCP Value Fund II

Lynnfield based real estate investment firm kicks off 2021 with plans to acquire their next multifamily property

 

Lynnfield, MA, February 24, 2021 – Yankee Capital Partners (YCP), the multifamily real estate investment firm, today announced the launch of their new fund, the YCP Value Fund II. The firm specializes in acquiring and optimizing B Class multifamily housing in markets selected with a data-driven approach. This new round of funding comes on the heels of proven success of this investment strategy in 2019 and 2020, setting the company on a trajectory for rapid growth in 2021.  This ‘value add’ strategy allows YCP to deliver strong investment returns and value to their accredited investor clients.  The new fund will also create opportunities for further investment in several emerging and high opportunity markets, including Texas and the Carolinas.  

“The Value Fund II is an exciting milestone for YCP and builds on the momentum the team has built so far,” said Ravee Dave, Founder, and CEO of YCP.

“We’re delighted to offer accredited investors access to commercial real estate, in particular multifamily assets, that are usually only available to institutional investors.  Our clients enjoy participating in the income and appreciation of a real, stabilized property, and we look forward to increasing our investor base with this new fund.”

 Upgrading the properties’ exterior and interiors are at the forefront of the YCP strategy. 

“We really set ourselves apart in that we have in-house construction expertise and are able to implement our value add strategy and improve these properties at a lower cost than our competitors to the benefit of our investors.  We continue to build on our construction and investment track record and can now welcome new investors to our next project,” said Edward Sarkisyan, Yankee Capital Partners’ COO. 

With growing interest in the sector, the YCP Value Fund II is already gaining traction with investors and the advisors who serve them.  Together, the YCP team and their investors recognize the need for access to diversification away from the traditional stock and bond markets while enjoying strong, risk-adjusted returns.  The team looks forward to further expansion and funding in 2021. 

 

About Yankee Capital Partners 

Yankee Capital Partners is a real estate investment company located in Lynnfield, Massachusetts.  YCP pools investor funds to acquire and reposition multifamily properties through a value add strategy, delivering strong returns and cash flow to its investors.  With a seasoned team of real estate investment and construction project management professionals, YCP is uniquely positioned to capture maximum value in each of its deals. 

https://yankee-capital.com/

 

6 Factors That Influence a Real Estate Investment Market

Location is king in real estate, but the market is queen when one desires a great real estate investment. Finding a strong market reaps benefits beyond what a good location can offer. A perfect spot is not always a guarantee of a successful market. Ignoring that fact can hurt your business plans.

However, if you got yourself a great location with a robust market, you are on your way to achieving a great return for your real estate investments. The intensity of a powerful market is a big portion of your business plan that you must consider. Some investors recognize its significance when it is too late, and all that is left is regret.

The real estate failure rate is high. Investors suffer from a 95% chance of unprofitability as a result of factors they ignored before they began investing in property. Investing capital, an experienced mentor, an advertising budget, and knowing the current market are among the neglected items. Passive investors must examine which markets are strong enough, as well as which ones need to be avoided.

Though it is never easy to identify red flags beforehand, being aware of possible issues that you may encounter while venturing into real estate investments is essential to prepare your action plan. Read on and spot these specific warning signs to dodge unwanted investment mishaps! Hiring a real estate asset management company will allow you to avoid these investment mishaps altogether.

1.   Rent to Income Ratio

As residents only have so much to pay for rent, a higher cost for rentals might not be the wisest thing to do. The rental fee should be proportional to the standard income ratio to entice people to acquire units. If you stretch the value by 40% more than a rental would typically cost, expect a decline of demands.

Residents also anticipate every penny they spend on their basic needs. Apart from finding a place to call home, they have other things to consider, such as food, electricity and water bills, clothes, and other household essentials. By putting your feet in your clients’ shoes, you will have a better view of what factors are preventing them from renting your property.

2.   Population Growth

Since the real estate business is mainly for families looking for household dwellings or employers planning to erect buildings, low population growth will impact your target market big time. The domino effect will then start from the declining market to the overall real estate economy.

A few factors behind the decline of the population growth in an area include net migration, the number of households, and overall population trends. Any place is a candidate for low population growth instances, so choose an area that will likely surpass such hurdles.

3.   Regulations

Every area or region has local government regulations to maintain an organized community. Suppose you are planning to extend your real estate investment market in a specific place. In that case, you must be fully aware of its protocols and follow the mandatory ordinances that the local authority has instilled.

Regardless of what type of real estate investment, being observant and keen on the structure, policy, and systems of the place will help your future proposal attempts become more successful.

4.   No Job Diversity

You should not invest in areas where a single industry employs more than the marginal bar of 20 to 25% of the area’s total population. If a single industry employs too much of the community, your exposure to that industry’s boom and bust cycle is far too high, and a simple downturn can lead to your bankruptcy.

That small downturn will have a huge effect on the real estate investment market since the residences living in the place are the frontlines that will be affected by the company’s fallback. It would be hard for them to pay for rent and the valuation of the property. Not to mention that the Net Operating Income or NOI will hit rock bottom.

5.   High Inventory

The two key metrics in business are supply and demand. Real estate investors, such as those in multifamily sectors, must be aware of the market’s current absorption rate. Let’s say you find a community you want to invest in, first you’ll have to look up how many new residences were built in the last year. Next, you want to find out how many of those are occupied; if a significant amount of them are empty, then the data clearly shows that there was an oversupply in the market. Its excess allocation is a solid reason for a market to be ineligible as an investment location.

6.   No Job Growth

One basic factor why most real estate investment markets are likely impossible to prosper is because there is no job growth in the chosen area. If there are no posts available for the residents to generate income, a lack of population growth and low demand for real estate will follow. Investors may check out employment data and yearly jobs on some accessible sites.

Make an Informed Decision

Real estate investors may encounter critical points, but that is where adept examination and thorough survey come in. If these factors are considered, investors will have a higher chance of running the real estate investment market smoothly.

The 4 Multifamily Trends That Will Make You Wealthy

Multifamily-type dwellings have paved the way to smart and practical living. There can be a lot of options as to where to invest your hard-earned money, yet it is always fruitful to consider the ones that have long-term potential — specifically the housing and property industry.

The occupancy rate of multifamily buildings in 2019 reached a peak of 96.3%. This high occupancy rate is despite the growth of available units by 3% each year.

Properties under such housing categories are surging in different parts of the world, indisputably in the United States of America. The National Apartment Association claims that the country needs to acquire another 4.6 million multifamily house units by 2020 to meet the demands of dwellers and investors who are thrilled to engage in the development assets.

All these numbers are from before the Coronavirus Pandemic, and that should be exciting to investors because this is one of the few investments that shouldn’t see a negative fallout, people still need a place to live, and with more people than ever working from home, they’ll need to invest more into their homes in the coming years.

Here’s a list of the top 4 multifamily trends that will make you wealthy, whether you invest yourself or use a trusted commercial investment company.

1.   New apartment construction’s inability to meet demands

A total of 225,000 rental units were built ready for occupancy in 2019. However, the recent count is not proportional to the increasing demands every year. Developers predict that the increase of prospective buyers and investors could continually rise for the next ten years and beyond. To accommodate these escalating bids there is a need to build 800,000 units

The imbalance of data in multifamily apartments is significant in driving target settlers’ occupancy and rental options. The lapse of time that developers are setting is considered a wise and smart move in helping the industry prosper.

Construction lags are seen as a “recovering economy”. The halted new apartment projects will eventually open, expecting an expansion of 4% of all the available units.

2.   Two large generations turning to rentals instead of homeownership

Baby Boomers and Generation Y are the two cohorts that changed the game in independent living. It has been observed that Baby Boomers are more likely to turn to rental properties rather than homeownership. The same goes for Generation Y individuals — who are also contributing to the rental surge.

Modern lifestyles have shaped the current generation and encouraged them to walk away from the norm of owning property. A Freddie Mac Multifamily released research tackled the evident rental behavior among the two generations. According to the research, 73% of Baby Boomers believe renting is more practical than buying a home. Following the number of the elder group, Generation Y runs with a percentage of 31%.

The main concern and reason for the shift is affordability. According to the study, renters believe that their economic situation has improved since they decided to choose rentals over homeownership. Consequently, the rental surge today fuelled the growth of commercial real estate under the multifamily sector.

3.   Increasing demand but decreasing vacancies

Reducing apartment vacancies increases the demand by around 5% in many multifamily residences. From the previous track record of 4.6%, Moody’s Analytics REIS revealed that the said vacancy rate for apartments will escalate in the third quarter. Most firms are crossing their fingers for a major climb of 5.4% by the end of this crisis until the year 2021.

Furthermore, the rising rental trends attract people who are looking for a wider selection of housing. It also lowers the markets’ cost. Such demographics boost the rental housing market value, which is one of five features of every great multifamily market. Effective renting is a measure that developers use to determine the surge of apartment demands.

4.   More are leaning into renting instead of homeownership

Homeownership levels is the term that describes the ratio of those who rent to those who own. For seven consecutive years, homeownership has been on the verge of decline, and development experts foresee that the trend may continue. According to a survey, the number of Americans owning a home was at its lowest peak in 15 years.

As a stark contrast to the fading surge of homeownership, there were 1,000,000 renters who set foot in the market during the same year. The dramatic shift started in the year 2016 when 4,000,000 households turned to rentals.

Make Informed Decisions

Societal and environmental factors, coupled with new changes in behaviors, have made drastic impacts on the housing and property industry. With these new trends completely changing the game for multifamily investors, it’s safe to say that there’s bound to be a significant increase in cash flow and ROI. You want to make sure you make informed decisions and fully evaluate each investment property before investing money into them.

5 Features of Every Great Multifamily Market

Many features influence the growth of a multifamily market, and elevating the business market means you have to think about long-term sustainable growth. Whether it is a double-digit rental growth or single-digit vacancy rate, the market holds a significant factor needed to determine if your venture is making progress. As the housing sectors’ demands change, the multifamily market also fluctuates. As a multifamily real estate investment firm, we help investors put their money into the best areas possible for maximal ROI growth.

Because there is no assurance of consistency, investing in any property without knowing its background rate and market status will ruin your investment. A few of the things that investors should look out for are the properties that may look impressive and perform well in the present time but lack the potential for future growth. Shareholders should not confuse architectural aesthetics, rent growth, or occupancy rates with important environmental market features’ reliability and consistency.

While multifamily sectors are emerging in the property industry, achieving the best long-term returns is not something to gamble on. Relying on recent growth to be sustained is very risky. Stability is seen in its highest form when an investor is aware of what or where the top markets are. Looking for vitality in the industry should not be too difficult if you know the elements that make a market stand out from the rest.

Find out the features of every great multifamily market and why they determine the verdict of your property investment. You can check out our real estate asset management services if you’re looking to grow your income further and maximize each of your investment properties’ performance.

Here are the features that make a multifamily market great:

1.   Population Growth

The population growth in the United States of America is estimated to be 1% year over year. For your investment to truly show returns, you must seek better than average growth. Investments in a market with significantly higher population growth will outperform the national average. If population and job growth are high, so will be demand for living space, and as demand increases, so does the price and profit.

Apart from examining the necessary factors in a market’s population growth, one must analyze the reason behind the community’s growth. The market will regress if its growth is the effect of a tremendous birth rate. The numbers of local migration fuels a strong multifamily market. If people are moving to the area for jobs, that means they will have money to spend on housing, and it’s less likely they will leave in the future.

2.   Employment Growth

The number of generated jobs is a growth trend that can indicate the multifamily market’s long-term mortality. Investing in markets that are exceeding the national average is the safest and most secure investment you can make. Places where there are plenty of jobs drive people to migrate and look for available rentals.

When analyzing the job market trends, it is crucial to consider the five and ten-year benchmarks. These can help in weighing the current options. The five-year trend allows investors to determine the market’s momentum better. On the other hand, ten-year trends give a significant historical viewpoint.

3.   Low Unemployment

Low unemployment is another feature of a great multifamily market. The key to a healthy multifamily investment is a market that has a stable job rate. To start, investors must begin surveying the current job counts in the area.

Potential places where the market could thrive are the ones that have the largest percentage of national employment. In this case, investors will get a better view of which areas have a strong and broad-based economy where there are evident and diverse employers.

4.   Employment Diversification

Assuming that the job market is above the national average, investors must next identify the industries contributing to the growth. Most stable employment markets are composed of government, educational, and medical jobs. The aforementioned niches are dependable and reliable sectors for strengthening the workforce; those employers don’t leave town during a recession and don’t go overseas to find cheap labor.

But the private industry is where the money is. The savvy investor will want to find an area where employment is a mix of government stability and private industry wealth. But don’t be too blinded by the gold; if it’s a single industry area, one little downturn can lead to the end of all real estate demand in the community. Seek places where one industry employs no more than 20% of the workforce.

5.   Population Critical Mass

A critical mass of the population is fundamental in building a strong multifamily market. A high population offers consistent growth and stability. Markets with a stable number in terms of population (with a count of at least 500,000) are already adept at engaging an efficient singular property manager, multifamily inventory, and a broad-range employment base.

Though the number is only an example, it will give investors an idea of what a safe and stable market could become and what it could offer to stakeholders looking for investments that could make their every penny worth it.

Make an Informed Decision

To ensure that investors get an abundant cash flow and receive a good ROI, they should pay attention to these features. The more they know, the more they can distinguish good multifamily markets from bad ones. And ultimately, this will help them make smart and profitable investments.

Apartment Building Investment: 3 Important Metrics Of You Must Know

If you want to make money in real estate, you need to keep yourself abreast of the renters’ needs and desires. Purchasing an apartment building can be a profitable investment. You can make a lot of money if you rent out your units or sell them for a higher price.

An apartment is the first place most people live when they leave home. Students, employees working their first jobs out of school, and people mid-career mostly live in apartments or condominiums, and many of them have roommates or partners with whom they share the bills.

Here are some of the things you should know when looking for an apartment building investment. Whether you hire a commercial real estate investment firm or you’re investing on your own, these metrics are important.

How Much Do People Make in the Area?

The apartment building investment you’re eyeing might be in a good part of town. However, the money you’ll be making depends on how much money the people make around it. Be sure to look into the stats of how much your prospective renters or buyers are making. That shouldn’t be hard as median household income rarely fluctuates even in times of crisis.

In St. Louis, the reported median household income hasn’t significantly changed for the past three decades. Data from the St. Louis Federal Reserve reports that median household income has only increased by about $10,000 from 1986. This increase is a disappointingly low number. However, with the millions of better-paying jobs in technology and unique careers, household income in America is at its highest.

How Much Do Homes Cost in the Area?

A report from the Case-Schiller Index says that American homes have gotten 31.6% more expensive from 2012 to 2017. That denotes a yearly rise of nearly 5.3%. Data from Redfin in 2012 suggested that in the 30 biggest cities across America, people who made an average income found 44% of the houses in their area affordable. In 2016, that percentage dropped to 32%.

Search for more localized statistics so your research is more relevant to your purchase. Are the home prices in the area you’re planning to buy an apartment building compatible with what people earn? If they’re not, you will see an “affordability gap.” This means fewer people will buy your units and resort to renting. This can work for you or against you, depending on how willing they are to find a cheaper place to live.

How Much Do People Pay for Rent in the Area?

The cost of buying a house today has far exceeded the top analysts’ predictions in the ‘80s and ‘90s. Housing prices have risen at such an accelerated rate that it’s become impractical for many Americans to consider even owning a bungalow. Apartment rents have also seen some hikes, although not as much compared to the cost of homeownership.

Redfin’s data reveals that apartment rents only climbed 18% in America’s 30 biggest cities from 2012 to 2016. If you pair this with a stagnating median income, more and more people’s salaries will go to paying rent, even though rates haven’t risen all that much. The struggles people face paying for a house are now even more intense and prolonged, which de-incentivizes the younger generation from pursuing homeownership.

If you’re planning to buy an apartment building, this might be good news for you. As long as the rise in rental rates is competing with surging home prices, renting an apartment will always remain the practical choice.

The local median income, rental rates, and home prices are the three things you should research to take advantage of the affordability gap and hopefully make a good return on your investment.

Here are some state-specific statistics on how much cheaper renting is than homeownership:

  • Renting is up to 35% less expensive than owning in Florida.
  • In Arizona, Delaware, Colorado, Indiana, Georgia, South Carolina, Nevada, and West Virginia, renting is 45% cheaper than owning.
  • Renting is 50% more affordable than owning in Virginia, Arkansas, Tennessee, Maryland, and North Carolina
  • In Utah, Alabama, Oklahoma, Hawaii, Mississippi, Idaho, Michigan, and Louisiana, renting is 55% cheaper than owning.
  • Renting is 60% cheaper in Texas, Alaska, Washington, Kentucky, New Mexico, and Missouri
  • In New York, Montana, Wisconsin, and Illinois renting are 75% more affordable than owning.

Call a Professional

According to a study by Freddie Mac, 78% of American renters believe that they’re better off renting than owning a house, so if you’re planning to buy an apartment building, the time is now. Do your research with the right partners to reduce the risk of your investment. Call Yankee Capital today at (781) 400-8778 and start your journey to becoming a great real estate investor.

Multifamily Financing: Here’s What You Need To Know

People say it on TV all the time: “Dream big.” Multifamily financing is reserved for savvy multi-family investors looking to:

  • Own or lease multi-story condominiums or apartment buildings
  • Renovate and rent out foreclosed business parks or multiple mobile homes
  • Own and lease multiple commercial spaces at the mall.

If you’re one of these investors, the only way to make that kind of real estate investment is through multifamily financing. Getting a loan from a bank or other financial institution for use in multiple real estate investments is helpful. Even people with cold cash in the bank prefer multifamily loans. That is because they can free up their money for more risk-averse investments or personal use.

When you decide to go into multifamily financing, you’ll become the principal debtor to whatever bank lends you money. This high-risk position reserves this financial instrument to only the most active investors. Passive investors are content with working knowledge or a minor stake in a multifamily financing deal.

Where to Get a Loan

Loan terms, economies, many other factors change weekly. Therefore, it’s impossible to give singular advice on where you should get a multifamily loan. However, with careful consideration of a few basic principles, it’s not that hard to make the right direction.

Going to a Bank

A lot of banks auction off foreclosed and distressed properties at a markdown compared to their original prices. Different banks have different metrics that will allow you to apply for a multifamily loan. However, most banks will be willing to stretch if they see some promise from the properties you’re eyeing.

Because banks take on higher risks for being so flexible, they might charge higher interest rates, periodic amortizations, and miscellaneous fees than other institutions. Banks are also extremely dependent on index funds, which could either work for you or against you.

Perhaps the biggest drawback when getting a bank loan is they rarely offer anything other than full recourse lending. As the borrower, you will not get out of debt until you repay your loan to the bank, and the bank can seize your other assets that are unrelated to the property.

Signing up for a Conduit Loan

Commercial mortgage-backed securities, also known as conduit loans, are more affordable than bank loans, but it’s harder to qualify. The less experienced you are as a property owner, and the more distressed the property you’re targeting, the higher their interest rates and fees.

When a bank gives you a loan, they lend you money that they’ve earned; conduit loans are marketed as security, meaning they’re packaged together with funds from a trust. The Real Estate Mortgage Investment Conduit is a trust that you can thank for making this happen, although their investors might not be as pleased to see their delinquency rates.

Insurance Companies

Insurance companies like to be involved when loans and risk-taking meet. Most insurance companies have been offering non-recourse loans to small and medium-sized businesses for decades, and their rates are competitive with the government’s rates. Some of the largest providers of multifamily loans in America are insurance companies, and they’re still accumulating more market share by the year.

The chances of qualifying for a multifamily loan from an insurance company can be improved if you’re trying to acquire a quality property. Insurance companies shy away from unnecessary liabilities, so they tend to stay away from neglected properties. However, they also provide better terms than banks and the government, with more flexibility and a lengthier hold period.

The Government

Even novice real estate investors have heard of Freddie Mac and Fannie Mae. They are government-sponsored entities or GSEs that provide loans that will help you save big on taxes.

If you’re an investor looking to borrow money so you can start a housing business, Fannie and Freddie can offer you the lowest interest rates out there. Also, if you meet their metrics for conservative water and energy consumption, you could sign up for their green program, further decreasing your interest.

Useful Terms

If you’re a complete newbie to multifamily investing, here are a few useful terms you have to learn.

  • LTV – Your total mortgage relative to how much your property is worth. If you take out a $2 million loan to buy a $10 million property, your LTV is 0.20. The higher the LTV, the quicker you’ll get a loan.
  • Non-recourse and recourse loans – If you can’t pay back your lender, they might come after your other assets if you have a full recourse loan. For non-recourse loans, foreclosing your property is the only possible consequence when you can’t pay.
  • Distressed and stabilized – These are two different types of properties: Stabilized properties have high occupancy rates, pretty much guaranteeing a good return on investment; any property with lower than a 90% occupancy rate for the past three months is distressed.

If You Need Help, Call a Professional

Multifamily financing can be a tricky business. If you’re ever unsure of anything, call Yankee Capital at (781) 400-8778 before moving forward with multifamily financing.