Three Pillars of Real Estate Investing

The Holy Trinity of Multifamily Acquisition: Location, Tenant Quality, and Property Condition

When it comes to multifamily property investment, success hinges not just on the financials but on a holistic approach to selecting the right property. At Old Money Capital, we specialize in multifamily, and our acquisition strategy is built on three critical pillars: Location, Quality of Tenants, and Condition of the Property. This blog post delves into why these factors are paramount and how they influence our decision-making process.

Location: The Bedrock of Property Value

The adage “location, location, location” continues to hold true in the realm of real estate investment, and for good reason. The neighborhood in which a property is situated directly impacts its desirability, value, and potential for appreciation. When evaluating a multifamily property, we meticulously assess the surrounding area to ensure it aligns with our standards. A desirable neighborhood enhances tenant satisfaction and retention, which are crucial for the long-term success of the investment.

We prioritize a set of specific, tangible factors about the location that directly influence a property’s potential and the quality of life it offers to tenants. These factors include:

Neighboring Properties’ Maintenance: Observing the condition of properties nearby is crucial. For example, a well-kept building next door with manicured lawns and fresh paint indicates a community that cares for its environment and maintains high standards.

Presence of Starbucks: Our interest in the proximity to a Starbucks stems from the company’s strategic approach to selecting locations. Starbucks meticulously researches and chooses neighborhoods indicative of a certain economic vitality and a population with disposable income. Thus, a nearby Starbucks is not merely an amenity but a marker of an area’s economic health and demographic appeal.

Homeless Encampments: The presence or absence of homeless encampments near the property is a significant consideration. Properties free from such encampments are generally more desirable, as encampments can affect tenants’ perceptions of safety and the overall appeal of the location.

Street Cleanliness: The cleanliness of the streets around the property, such as the absence of trash, is a direct indicator of the local community’s pride and the municipality’s effectiveness in maintaining public spaces.

By focusing on these specific factors, we aim to invest in properties that not only promise a good return but also contribute to the well-being and satisfaction of the tenants who call them home. This detailed, example-driven approach ensures our investments are well-informed and aligned with our company’s standards for quality and community development.

Quality of Tenants: The Heartbeat of the Property

In our approach to evaluating multifamily properties, the quality of the tenants plays a pivotal role in our decision-making process. We assess this through a careful examination of specific behaviors and practices that indicate the tenants’ respect for their living spaces and the community at large. These factors include:

Cleanliness of Apartments: Observing whether tenants maintain clean living spaces inside their apartments is crucial. A clean interior often reflects a tenant’s respect for their home and consideration for the property’s upkeep.

Exterior Clutter: The presence of excessive items or junk outside an apartment can detract from the property’s overall appeal and suggest a lack of care or respect for communal spaces.

Common Area Maintenance: How tenants treat common areas, especially regarding littering or leaving trash, is indicative of their community spirit and respect for shared spaces. Well-maintained common areas suggest tenants who value their environment and contribute positively to the community’s ambiance.

Window Boarding: Tenants who board up their windows may be indicating a lack of engagement with the community or concerns about safety. This practice can also negatively impact the property’s aesthetic appeal and suggest underlying issues that need to be addressed.

By prioritizing these specific factors in our evaluation process, we aim to secure a caliber of tenants who are deeply invested in maintaining a clean, respectful, and harmonious living environment. This focus helps us to ensure that our multifamily properties are populated by individuals who not only care for their own spaces but also contribute positively to the broader community.

Condition of the Property: The Foundation for Growth

Understanding the current state of a property is essential for forecasting its potential and identifying necessary investments. We categorize issues into two main types: those that must be fixed immediately and opportunities for improvement.

Must-Fix Issues: Structural integrity, roofing, plumbing, and HVAC systems fall under critical concerns. If a property exhibits significant structural problems, it often becomes a deal-breaker due to the unpredictability and potential cost of repairs. We prioritize the safety and stability of the building above all.

Opportunities for Improvement: Aesthetic enhancements and unit upgrades, such as fresh paint or new appliances, can significantly increase a property’s appeal and value. These improvements are integral to our business plan, and we allocate sufficient funds to realize these upgrades.

The employment of a professional inspector is non-negotiable. Despite the experience within our team, a professional inspector brings an objective eye and a detailed approach to identifying both obvious and hidden issues. This diligence ensures we are fully aware of what we are committing to and can plan financially for any necessary repairs or enhancements.

Beyond the Pillars

While location, tenant quality, and property condition are our primary focus, they are part of a broader spectrum of considerations that guide our investment decisions. The real estate market is dynamic, and success requires adaptability, foresight, and a commitment to excellence. At Old Money Capital, we believe that by adhering to these principles, we not only secure profitable investments but also contribute positively to the communities we invest in.

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