The key to maximizing your returns when investing in commercial real estate is understanding demand in your area. If you’re looking to get into multifamily housing, that means understanding the market cap in various neighborhoods as well as the amenities and other features that make for a desirable building.
In recent years, there has been a trend in many cities toward smaller apartment buildings. Tenants love them for a lot of reasons, and many investors find them to be an easier path into multifamily housing than duplexes or large buildings and complexes made of multiple buildings. Small apartment buildings can have many of the features offered by larger ones if you plan correctly, and they have advantages that many tenants gravitate toward.
If you’re looking to invest in commercial real estate and you are trying to find the right small apartment building, start by looking for options that already exist in established neighborhoods. One of the big advantages to residents of smaller buildings is their ability to fit into neighborhoods with single-family houses and walkable options for shops, laundry, and dining. Finding that desirable location can help you increase demand and keep your occupancy high.
Another very attractive feature, especially to long-term residents, is the way smaller buildings minimize noise and traffic. With the right upgrades and a good floor plan, it’s easier to have quiet, private spaces in a small building, especially if there are only one or two apartments per floor. In buildings with only two units per floor and a central stairwell, occupants do not even have to share a wall with another resident most of the time. In buildings with four units per floor, there is still only one shared wall, as well as the ceiling or floor.
However, your building size and location are not the only things that draw in applicants when you have available units. Amenities and features are also vital. If you do not offer in-unit laundry options, then it’s a good idea to provide laundry facilities for your tenants. In a smaller building, this can often be done with just a single washer and drier in a shared space. Add vending machines for drinks and snacks to provide a convenient option that doesn’t involve leaving home to increase your revenue without having to raise the rent.
Finally, remember that even in small buildings, security is a big draw. If the place is quiet, there are only a few neighbors to get to know, and you have secure entry and screening systems, you’ll find you have no trouble attracting applicants when you have openings, and that helps you optimize your returns when investing in commercial real estate.
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For many businesses, purchasing, selling, and investing in real estate is essential for profitability and growth. At the same time, it’s important to protect your company’s finances by choosing interest rates that save you money. At BMF Advisors, our goal is to help you maintain a healthy, progressive business. Let us customize your commercial real estate financing for your specific needs and budget.
