Updated: Mar 7
Some syndicators believe it’s best to invest in multifamily properties that are close to home, because they are already familiar with the area, the competition, and usually have a network of real estate brokers and agents that can alert them to properties that will be coming available. On the other hand, there are tremendous opportunities to syndicate deals or invest in properties that are located out-of-state, due to surges in population growth, limited availability of higher end rental units in those markets, or a multitude of other factors.
Every syndicator has a different investment and business strategy. I look for value-add deals in areas with high employment numbers as well as sustained growth in population, jobs, and personal income. I also look for deals in landlord friendly states, where there isn’t rent control in place. I live in Southern California, and even though it’s the best place to live, I cannot say the same about real estate investments. Compressed cap rates, sharp market swings, and rent controls are only some of the issues real estate investors face here. I chose to buy in Texas, Florida, and Georgia and have been doing that for years.
Finding the Right Market
Once a property becomes available that meets my criteria, I do a thorough market analysis. That means a deep dive on the numbers for job growth, rental income growth, and an in-depth analysis of the market’s population makeup. Are there a lot of Millennials in the market? What about retirees? They’re both key renter groups and I want to be sure that the market has these groups available.
If you’re doing your own analytics, there are a variety of online tools available to you to make that job easier. To look at population growth and demographic makeup of a market, you can use www.census.gov, www.citydata.com, or even Google. Just plug in the market and type “population increases” or any other topic you want information on.
There are more advanced tools as well to see real estate appreciation and many other metrics, including CBRE, Millichap, Yardi Matrix, and VeroFORECAST. Each one provides key data that will help you in your analysis.
Also, I previously mentioned that one of my criteria was having a “landlord-friendly” state. That means in addition to not having rent control in place, I also look to see the laws governing eviction of renters who don’t pay their rent. The last thing I want is to invest in a state where it’s impossible to evict a non-paying tenant.
Create an Out-of-State Team
One thing I’ve learned in syndicating out-of-state deals is that you don’t want to do it alone. You need a professional team working with you that not only understands multifamily investments but knows the market you’re planning on investing in.
Your team should include a local broker, not only for their market knowledge and ability to find deals, but because they’re a good source for recommending other team members, including a lawyer and a CPA who understand out-of-state investments. They’re also a good source for recommending a local property manager or property management company.
Why a CPA and lawyer? Every state has its own laws and regulations relating to property ownership and property taxes, so it’s smart to have a local lawyer and a CPA on your team. They understand all of the local building codes and ordinances, which will come in handy if you’re going to do a value-add renovation to the property.