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The following was written by Joseph Bramante, CEO and co-founder of TriArc Real Estate Partners.
Investing in multifamily properties can be an excellent opportunity for passive investors to diversify their portfolios and generate steady income. However, with any investment, it’s crucial to conduct due diligence. One way to do this is by using a comprehensive checklist to assess the viability of a potential multifamily real estate investment.
Having a checklist is essential because it provides a framework for evaluating critical components of a multifamily investment opportunity. The checklist should include items such as verifying the sponsor’s experience, verifying the market fundamentals have the potential for long-term success, confirming the sponsor’s track record of successful exits, and ensuring that the fee structure is appropriate.
By following a checklist, investors can ensure that they’re “consistently” conducting a thorough analysis of opportunities, attempting to mitigate potential risks, and maximizing potential returns.
The multifamily sector has long been considered a relatively safe investment, especially when home prices rose during the pandemic, and many people were forced to keep renting.
It’s more important than ever for passive investors to conduct due diligence and assess the viability of a potential multifamily real estate investment thoroughly.
Joseph Bramante, CEO and co-founder of Tri-Arc Real Estate
However, the recent increase in interest rates has cooled off the apartment sector, and investors who bought properties at the peak of the market in 2021 are facing major challenges ahead. Apartment-building values are down more than 20 percent from their peak, according to real-estate analytics firm Green Street. Some have already filed for foreclosure, like the Dallas Sponsor who lost his 3,200-unit Houston portfolio and an estimated $60 million of Investor capital.
Large investment firms, such as Veritas and Blackstone Group, have had payment issues with floating-rate multifamily loans in recent months. It is a challenging time for landlords who invested in lower-income apartment complexes, hoping to raise rents and charge tenants extra fees for amenities.
This is why it’s more important than ever for passive investors to conduct due diligence and assess the viability of a potential multifamily real estate investment thoroughly. Our comprehensive checklist includes 20 critical due diligence items that investors should verify before investing in multifamily real estate. By following the checklist, investors can attempt to mitigate potential risks and maximize potential returns.
In conclusion, passive investing in multifamily real estate can be an excellent way to diversify your portfolio and generate steady income. However, it’s crucial to conduct due diligence and assess the viability of a potential investment thoroughly. A comprehensive checklist, like ours, can provide a framework for evaluating potential multifamily investment opportunities. By following the checklist, passive investors can make informed investment decisions in the multifamily real estate market.
Joseph Bramante is the CEO and co-founder of TriArc Real Estate Partners, a Houston-based firm specializing in multifamily development and acquisitions. There he leads of team of seasoned executives and over 75 employees as they strive to be Houston’s premier multifamily operator and acquire over 10,000 units by the end of the decade.
In addition to his role at TriArc, Joseph is the host of the Passive Investor Conference, an event that brings together experts in the field to share insights and strategies on passive investing. He is also the creator of Passive Investing Academy, an educational platform designed to teach passive investors how to properly vet multifamily deals.
With his extensive knowledge and experience, Joseph is passionate about helping others achieve their financial goals through smart and strategic investments. Whether through TriArc, the Passive Investor Conference, or Passive Investing Academy, Joseph is committed to empowering passive investors to make more informed decisions about their financial futures.
Established in 2013, TriArc Real Estate Partners is a full-service, vertically integrated investment management firm focused on the development, acquisition, and management of multifamily properties. The Executives at TriArc have had ownership interests in, and/or operated more than 47,000 apartment units, totaling an estimated $1.9 billion in commercial real estate assets over an average career span of 22 years. This depth of experience has allowed them to produce an average equity multiple of 2.63 and 23.5 percent IRR across five exits. To date, the company has completed over $375 million in transactions and currently has an AUM of $240 million across 1,650 units.
TriArc is not an affiliate of Equity Trust Company. Opinions or ideas expressed by TriArc, their affiliates, and employees are not those of Equity Trust Company nor do they reflect their views or endorsement. This material is for educational purposes only, and should not be construed as tax, legal, or investment advice. Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Investing involves risk, including possible loss of principal. Whenever making an investment decision, please consult with your tax attorney or financial professional.
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