Multifamily Real Estate Investing

First things first, “vertical” rising real estate development can be categorized into single family, multifamily and commercial, either for sale or for lease. Among the three, the multifamily real estate investing and commercial development are closely related except that the former is primarily residential and the latter is institutional. Although this may be arbitrary, real estate investors, developers and brokers generally refer to the multifamily real estate investing in terms of units. Residential apartments with a minimum of 10 units and more are already categorized as “multifamily”; and so with units of duplexes and high rise condominiums taken as a whole project and not on per unit or single duplex bases. This includes the “horizontal” land these structures are built. Commercial real estate investing, on the other hand, generally, is malls, shopping centers, office buildings, hotels, hospitals and educational buildings. The structures could readily be converted to residential units but as they are, they serve other purposes primarily not for human abode. Real estate marketing technically is highly capital intensive because of the lead time between the selling start up and the final negotiation for contract signing, which means, the property is certified sold. Real estate marketing, however, is a “one and done” transaction. Negotiate and consummate one transaction and large cash flow is created deducted with minimal expenses, net of profit is already realizable. In particular, between commercial and multifamily real estate investing, the latter is considered more alluring to invest because of its marketing differentiation and segmentation. Demand for structures of abode covers a wide market differentiation and segmentation because the entire population strata are the target. Commercial properties are limited to the niches of the business investor community when compared to residential structures. Taking everything else constant, it is easier to sell or lease apartments than a hospital or a school. Between the high rise condominiums, taken as a whole, and a mall, turnover rate is faster for the former than the latter. Then, taking into consideration the economy of scale when multifamily properties are grouped as a whole, profit in the final analysis is greater as unit cost decreases for every multifamily unit built which commercial properties do not have such advantage. Multifamily real estate investing stakeholders are lured by this business because of the economy of scale and “one and done” principle. The fact that the per unit costing decreases, the spread of risks is wider as well. Leeway of defaults in multifamily property transactions is created which is unlikely in commercial or single-family properties. Multifamily marketing strategy can be subdivided into a gradated retail sales or wholesale. This is almost impossible in selling commercial properties, too, since hospitals and schools as an example cannot be sold piece by piece. The fact that retail sales is a strategy, anecdotal reports of success stories are plenty in multifamily real estate investing. Retail selling can be done on a part time basis. Undergoing the “one and done” principle, cash flows are accumulated more than enough to launch the follow up deal.