Real Estate Investing: Multi Family vs Luxury Real Estate

DAYTON OHIO – Real estate investors remain bullish on the market for multi-family properties (apartment dwellings) in Dayton & Cincinnati Ohio. This coming year (2015), I foresee rent increases stabilizing and the best opportunities for real estate investors could be in older buildings, not new luxury properties.

If you watch the market closely, you’ll see that JPMorgan Chase and Prudential Mortgage Capital both have a positive outlook for multifamily properties and commercial real estate for the coming year. I’ve spoken with some of Dayton and Cincinnati Ohio’s top real estate investors and they have all mentioned that they see no end for the demand of investors to develop and buy multifamily housing in Dayton / Cincinnati Ohio.

The strong competition for the limited amount of duplexes, triplexes, and multifamily properties for sale and the limited amount of vacant land has driven up prices and demand for apartment buildings in Dayton / Cincinnati Ohio.

If you are thinking about investing in multi-family property in the Dayton / Cincinnati Ohio area, here are a few things to consider before buying an investment property.

Location, Location, Location of The Property

Before investing in a multifamily property, you’ll want to become familiar with the location of the property. You will need to understand the local real estate market, school district, crime rates, and if the area your investment property is located in is desirable to potential renters (tenants).

The Number of Units in A Potential Rental Property

You’ll want to educate yourself on the number of units per building and how many bedrooms and bathrooms are in each unit. In many cases, you’ll find a building that has four units, with three units having 2 bedrooms/1 bath and the fourth unit having 3 bedrooms/2 baths.

How Much Rental Income Each Unit Brings In

You’ll need to know how much rent each unit will bring in to calculate your return on investment (ROI). Because all units are not going to be the same size or have the same number of bedrooms, bathrooms, etc, you may be able to charge different rent amounts for the different units.

Return On Investment (ROI)

If the multifamily investment property you are considering has met all other criteria, you now need to calculate return on investment. Return on investment, or ROI, is the most common profitability ratio. There are several ways to determine ROI, but the most frequently used method is to divide net profit by total assets. So if your net profit is $100,000 and your total assets are $300,000, your ROI would be .33 or 33 percent.

Question The Seller About Their Rental Property

You’ll want to ask the current owner (seller) why he/she has decided to sell the investment property. Are there problems with the buildings? Not enough cash flow being generated? Are they just tired of being a landlord?