Multi-Family Private Mortgage Notes: a Great Opportunity in Any Market |
|
The housing market can be uncertain, but there's one constant: Everybody needs a place to live. That means that even though one part or another of the housing market may rise and fall according to changing demand, the demand across all segments is based on demographic factors: how many people need a place to live and the living arrangements they prefer.
|
|
|
When consumers can't make the leap to a single family home, multifamily dwellings such as apartments and duplexes often see an increase in demand. More people rent for longer, making these properties more valuable investments. That's why multifamily dwellings tend to do better in a down market for single family residences. Furthermore, these investments are available at every investment scale based on both capacity and property value. You can purchase a modest triplex in an economically priced area, or invest in either a high rise or an upscale building in a high-priced location.
|
|
|
As mentioned before, demographics are the most important consideration. Apartments and similar dwellings are most attractive to singles, the under 35 and the over 55 demographic. High demand is associated with larger numbers of retirees, college students and single parents. Looking at census data can give you an excellent idea of your investment's prospects. Take a close look at the building's condition as well. Multifamily dwellings come in all levels of quality. Repairs and upgrades can quickly pay off in the ability to charge higher rents and avoid tenant hassles.
|
|
|
If your ultimate goal is a private mortgage note you want a building that will attract quality tenants even though your borrower is going to handle building management. Naturally, you want to eliminate any impediment to a regular income stream for the manager, which equates to regular payments on your note.
|
|
|
In these cases, your relationship with the borrower/owner relies on more than their creditworthiness. You must assess the borrower's ability to manage the property. Take a look at his or her history in business. If the borrower successfully owns and manages several properties already this is obviously a strong positive factor. Remember to consult with a real estate lawyer who is well-versed in multifamily dwelling laws, regulations and taxes, particularly where they concern liability, as your duties toward tenants will vary based on the type of dwelling, zoning and other factors. And remember: If you need to convert your multifamily residential mortgage note into a lump sum, contact us to buy your note.
|
|
