The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:
When inspecting a multifamily property for investment purposes, physical condition is key. These are living and breathing assets that serve as the home for your customers. Structures will break down, and they’ll need to be repaired, and you’ll need to consider any surprise repairs that may come up as well. Managing a multifamily property is really a team sport, and one of the biggest risks is your operations working alongside your various teams.
Richard Wilson: You see hundreds of multifamily every quarter, I know – what are some of the most important things to look for when inspecting a multifamily property?
Peter Von Der Ahe: I think the biggest thing that comes up as far as multifamily is, you know, obvious all of the physical condition aspects. I guess you would say in that industry that these are assets where people live, so they’re living, breathing things, things have to be – they break, they have to get repaired, that’s part of the business. What you want to try to prevent is repairs that come up as big surprises, and most of the big ones are well-known and you can research ahead of time. So, and in this conversation where we’re comparing against net lease, probably the biggest risk with multifamily is your operations and your execution team, and operating multifamily is definitely a team sport. Depending on how big it is, you have third party management, you have asset management, and you have all of the vendors and the soft skills. So, there’s so many different types of players that you have to interact with from vendors to bankers to attorneys to the tenants themselves, and your residents who are actually your customers.
There’s a lot more flavors that you have to be able to handle and manage. So, things can go wrong in all those categories, and also things can go very well. That’s the two sides of the coin – the opportunity and the obstacles, right?