Multi-family investing in a hot market is not as difficult as some investors might make it seem. Good deals are everywhere you just need to know where to look for them, even in the hottest areas like downtown Los Angeles, San Francisco, Chelsea (New York City), Chicago and Seattle.
There is more to multi-family apartment investing than going on websites like Loopnet, asking other brokers, and searching at Multiple Listing Service (MLS). Every investor and realtor uses the same sources but the best deals for a multi-family apartment are definitely not found there. You might find one or two but you will need to think outside the box to make a profit worth your time.
One thing to keep in mind is “shadow inventory”. Shadow inventory is where it’s all at. In this article, the professionals at Local Records Office will explain how you can find the best multi-family apartments using shadow inventory in the United States’ hottest real estate areas.
Shadow Inventory
Shadow inventory usually refers to uninhabited or soon-to-be uninhabited real estate, which means it includes apartment buildings that are yet to be put on the real estate market. Shadow inventory is sometimes referred to as ‘zombie properties’ because most of them are not vacant and are not in the market. The reason these properties are referred as shadow inventory is that they are parked in the dark waiting to get sold by the bank or the property owner that has neglected the property (usually for years).
Why Banks or Property Owners Don’t Sell the Property Now?
Unfortunately, there are a lot of different laws in foreclosure homes across the United States; every state has strict laws on how a bank handles a foreclosed home.
Another reason why lenders and or property owners hold on to properties for longer period of time is that they know the more time passes the more the property will go up on value, therefore making a higher return. In other words, sellers and investors don’t want to flood the real estate market with distressed properties that won’t make as much money as they hope.
How Does Shadow Inventory Benefit the Real Estate Investor?
Great real estate investors know to stay away from Loopnet, asking other brokers and searching at Multiple Listing Service (MLS). Great real estate investors know that going directly to the source pays off. Investors are better off going to Real Estate Owned (REO), going to smaller banks, portfolio lenders and credit unions, by doing so the will have the advantage to beat the competition and buy properties for a much lower cost.
Know What to do in Front of Property Owners
Real estate investors are trained to look for properties that will have a high investment but not every investor knows what to do when the owner is in front of them. What do you do? What do you say? How do you build trust with him or her? And then structure a deal around the conversation?
Rehab / Renovation
The majority of the multi-family apartments that are in shadow inventory will need some type of renovation. The faster you realize that you will need to put money into the apartment the shock you will be.
the good side of these types of apartments is that there will be a 10 to 45% rent increase when the apartment is done being renovated.