How Brokers Can Tap Into the Growing Demand for Multifamily Property

Multifamily properties have always made for great investments and a smart way to build long-term wealth. This asset class offers investors strong cash flow that often exceeds that of similarly priced single-family homes, and provides other benefits like appreciation and tax advantages. In today’s competitive, low-inventory market environment they have become even more lucrative investments. As a broker or lending partner, educating your clients about the ins and outs of this property type, and successfully guiding their investment strategy, is one of the most crucial insights you can offer.

Continue reading as we cover the reasons why multifamily property has been so in demand lately, and how brokers can benefit from tapping into this profitable asset class.

The Multifamily Market Is Booming — Here’s Why

Multifamily real estate has seen a boom in demand in recent years, and that’s due to a few key factors. First, the affordability challenges facing the market have caused many would be homebuyers to continue renting, driving up pricing. Also, younger generations including Millennials and Gen Z have proven to prefer renting over homebuying. The stronger income potential and stability of multifamily properties hasn’t gone unnoticed by investors, with more and more choosing to add them to their portfolios. Even larger institutional investors have ramped up their acquisitions of multifamily homes, as shown by the latest data from CRE Daily.

What This Means for Brokers

For brokers and lending partners, multifamily properties present a great opportunity. Not only do these larger dollar value deals come with better commissions, but multifamily homes are also a great steppingstone for portfolio expansion. Clients who invest in multifamily often go on to refinance as a means of funding new acquisitions, and the solid income provided by these properties helps fuel that growth. Investor clients will also come to rely on your expertise in selecting good markets and properties to invest in. This allows you to build strong working relationships with these clients over time, with plenty of chances for repeat business.

How to Position Yourself as a Multifamily Expert

The key to tapping into the multifamily market is specializing in this asset class, which you can do by offering program specific financing options. You will need to speak the language of multifamily investing, and be familiar with key metrics like NOI, Cap Rate, and DSCR. Of course, this means educating yourself on multifamily properties and what the underwriting process looks like for them. If you want to provide additional value to clients, use your market expertise to help them identify profitable investment opportunities. You can also create content or materials to help educate clients on the multifamily asset class.

Sourcing High-Potential Multifamily Deals

In a competitive real estate environment, sourcing high quality multifamily deals is how brokers can truly set themselves apart. You will first need to target the right markets, which you can identify by looking at key statistics like population growth, job growth, vacancy rates, and rental pricing. Certain properties may also present hidden opportunities; like for instance, you may find an older, underperforming property that can quickly be updated to generate more rent.

You should also try to establish an off-market network to help you source properties more effectively. This includes connecting with motivated sellers, tapping wholesalers, and checking auctions/foreclosure listings.

Leveraging Financing to Add Value to Your Clients

You can help streamline your clients’ deals, and save them money, by connecting them with the right financing options. Apart from conventional lenders like banks or credit unions, private lenders can be a great option for financing multifamily deals. These loans are typically based on DSCR, or the property’s income/expense ratio, which means that the borrower’s personal credit plays less of a factor in loan approval. They also have a less stringent application process, which means loans can be approved faster, a key benefit in time-sensitive scenarios.

As a broker, it can be a good idea to offer a variety of loan programs, like renovation financing for value-add opportunities, and bridge loans for transitional funding. Offering a range of loan solutions helps you navigate more of your clients funding challenges, and positions you as a comprehensive investing partner, not just another loan broker.

RCN Capital

The best way to save on a real estate investment is to obtain financing from a lender that can provide you with the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate professionals. If you are looking to offer multifamily financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.