Advantages of Multifamily Real Estate

Multifamily is widely considered one of the most stable asset classes in real estate. Here are some of our top reasons why we prefer Multifamily investing over other strategies:

1 – Valuation

Multifamily properties are valued on income. NOI specifically – which stands for Net Operating Income. Think of each property as a business, there is revenue and expenses involved  in operating these assets. The more you can increase the income, the more property is worth. You can increase NOI by decreasing expenses or increasing revenue (rents).

Single family properties are valued based on the “comparable approach” (value is derived from similar homes sold nearby), so no matter how much income its generating its likely only worth as much as your neighbour. Multifamily on the other hand, is valued and traded based on a multiple of their Net Operating income. This allows an investor to force their appreciation and calculate their equity gains.

2 – Recession Proof

Historically the multifamily asset class has been extremely resilient in a market downturn. When there is a correction/recession people tend to downsize and become renters. Since multifamily rentals are typically 1-3 bedroom units they remain very affordable and still in high demand in any stage of the economic cycle.

3 – Economies of scale
Costs are lessened when purchasing, managing and maintaining multiple units under one roof.  Purchasing materials, renovations and property management are all streamlined and become more efficient.

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How to Determine Market Rents

Rental Ads

Take a look at the price range for rental listings in your area. Find a high/low and average depending on the finishes. Use resources like Kijiji, Facebook Marketplace, Padmapper, etc.

Property Managers

If you are using a property manager or know a PM you can speak with, get their advice. They have eyes on the market and are constantly advertising and leasing units.

Trial & Error

Start with the highest rent you think you could achieve, if the ad sits you know your price is too high. Adjust quickly and don’t let ads age.

Real Estate Reporting

CMHC publishes rent reports every year in each major city in Canada. However, it has been widely known that the rents published are extremely conservative.


Multifamily Due Diligence

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