The Broker’s Playbook for Multifamily Investment Success

Multifamily properties are a smart way to build a strong investment portfolio and create long-term wealth. These investments come with very attractive cap rates, and their inherent desirability means they steadily appreciate in value over time. It also means that multifamily homes are resistant to negative effects like inflation, and they often hold their value or even continue to appreciate in economic downturns. As a broker or lending partner, offering multifamily financing solutions allows you to tap into this lucrative asset class and reach a new segment of investor clients.

Want to learn more about the ins-and-outs of multifamily investing? Continue reading for our guide specifically designed for real estate lending partners.

Understanding the Multifamily Investment Landscape 

Let’s cover some of the key benefits of multifamily investments, and the trends driving demand for them in today’s market environment. Most investors choose multifamily homes because they offer increased cash flow potential over single-family investments. Having multiple, cash-generating rental units under the same roof means vacancies are less impactful, and tenant management becomes an easier task as well. Be sure to highlight these benefits when discussing multifamily investments with your clients.

As for the trends driving demand for multifamily homes, that lack of housing inventory in markets across the US has played a big role, as well as growing affordability challenges. Many potential buyers who would otherwise be purchasing a home have instead chosen to rent, and most of the time, a unit in a multifamily property. This has had an additional effect, leading to increases for both multifamily home values and rental pricing. These factors have had an impact on the profitability of multifamily investments, so it’s important to consider them when advising clients.

A Broker’s Role in Multifamily Success

Lending partners play a crucial role in ensuring their clients find success in the multifamily space. Most investors don’t have experience with multifamily properties, so they will rely on your expertise when making decisions. This certainly applies to negotiating favorable terms when structuring financing, but also extends to due diligence in selecting which market and properties to invest in. Help your clients by running the numbers on each potential investment, determining key stats like cap rate and NOI which can be used to easily compare different properties.

Providing the most value to your clients will require you to have a diversified skillset. That includes relationship building with real estate professionals and financing providers, but also having a solid grasp of the fundamentals of investing in multifamily property. Along with allowing you to match clients with the right financing options, this will help you provide better and more relevant recommendations to them.

Finding and Analyzing Profitable Multifamily Deals

Every successful deal starts with an appropriate amount of due diligence, which often entails comparing multiple different market and property options. You can utilize data-driven tools like ATTOM Data and REiDEALMASTER to obtain up to date information on properties. By taking a look at key metrics like cap rate, vacancy rate, and DSCR ratio, you can recommend the best properties to your clients. Remember that you don’t have to limit yourself to the MLS either. Utilize your network to connect clients with off-market listings; these include auction/foreclosure homes, motivated sellers, and wholesalers.

Financing Strategies for Multifamily Investments

Understanding the different loan options available for multifamily investments helps you match your clients with financing that’s most suitable for them. Conventional loans are still an option with multifamily homes, and they offer attractive interest rates as well, but they also come with stringent guidelines and a long application process that isn’t ideal for every project. Instead, you may want to connect your clients with a private lender that operates in the real estate space. These lenders often have less stringent loan requirements since underwriting is asset-based. It also means that your clients can still qualify for financing even if their credit is less than perfect.

Additionally, private lenders typically offer short-term loans designed for quick acquisitions. These can be incredibly valuable in competitive markets where investors need to move quickly. It allows them to secure the purchase of a lucrative property, while also giving them time to structure more permanent financing for it.

Closing Deals and Scaling Success

Being successful in the multifamily space is a process of building long-term client relationships, through offering timely advice and connecting them with quality financing options. Becoming versed in multifamily investing is the most effective way to do this, since it allows you to become a trusted advisor for your clients. This also means helping them conduct due diligence, ensuring they obtain appropriate inspections, and reviewing financials before moving forward with a deal. It also allows you to identify and red flags in potential deals, saving your clients from making bad investments.

As for some strategies for building long-term relationships with your clients, you can provide ongoing market insights by building an email list and sending them regular updates on deals and market activity in the multifamily sector. You can also offer services to help your existing clients scale from smaller rental properties to multifamily homes, and eventually to large-scale portfolio investments. Highlighting the benefits of scaling is a great way to encourage clients to take the necessary steps towards portfolio growth.

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 finance a multifamily deal, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.