By Dawn Dyer
Dyer Sheehan Group, Inc.
Experts agree that multifamily properties offer great investment potential. Demographic, economic and other factors will increase demand for apartments over the coming decade. At the same time, the supply of new units in many areas will continue to be limited, especially in high barrier-to-entry locations like Coastal Southern California, where growth controls and other land-use policies restrict new construction.
Many think that multifamily investment is a sure way to make a lot of money quickly. Right? Not so fast, no investment is a sure thing. And, despite the hype on late-night infomercials, hitting a home run in real estate isn’t nearly as easy as it may sound. Real estate investing should never be viewed as a get-rich-quick scheme, but more as a solid path to long-term financial well being. So, what are the key mistakes that can put your hard-earned equity and dollars at risk, and how can you avoid the most common pitfalls?
1) Winging It
The most fundamental error an investor can make is winging it. Multifamily investment is a business, and should be approached with a strategic and deliberate plan. Unfortunately, many investors perceive real estate as a transactional or opportunistic endeavor, based on a belief in short-term profits versus careful consideration of their long-term goals within the context of personal priorities, as well as available resources of time and money.
By taking the time to clarify your investment goals and understand local market dynamics, as well as some basic principals of the multifamily business, you can make well-informed decisions. Carefully choose acquisitions based on the types of property, tenant profile, and locations that are best suited to your multifamily investment business plan. Make strategic choices on when to trade-up or sell your buildings; assess the types of improvements that will generate the best returns; and learn how to manage your assets to maximize profit and value.
2) Getting Emotionally Involved
This may be good for your personal relationships, but it is bad business. Falling in love with a property can cause you to overlook critical flaws like deferred maintenance or inflated rents. On the other hand, walking away from a great deal because you are upset, frustrated or angry with the other party in the transaction could cost you a fabulous opportunity. Establishing a relationship with a qualified, trustworthy multifamily broker will provide you with an important “sounding board” for your decisions, and a necessary buffer in helping complete the transaction if principals become contentious. Having a carefully planned investment strategy will help you avoid making impulsive or emotionally charged decisions.
We will be discussing the other eight most common investment mistakes at the next Apartment Investor Academy, to be held in Camarillo on the evening of May 11. The seminar is free, but pre-registration is required. To reserve your seat, contact Emily@Dyer Sheehan.com or call 805-653-8100 for more information.
Dyer Sheehan Group, Inc., is Ventura County’s Apartment Expert Our professional Brokerage & Real Estate Consulting Services enable Clients to Make Informed Investment & Development Decisions by Identifying Opportunities, Solving Problems & Mitigating Risks. All information provided herein is from sources deemed to be reliable, but no guarantee or warranty is stated or implied. Copyright©2011 Dyer Sheehan Group, Inc.
