The Current Phoenix Multifamily Landscaping - What to Know Before Investing in Your Next Deal

Are you considering a real estate investment in the Phoenix market?

The multifamily industry has been steadily growing, which has provided opportunities for both local and foreign investors. However, there are many factors to weigh before taking the plunge. From understanding new development trends to navigating the new debt market, informed investing is the key to success.

In this blog post, we’ll guide you through some of the most important topics when evaluating a property in the Phoenix region – continue reading if you want to be more educated when pursuing your next multifamily investment!

1. The current state of the Phoenix apartment market

The Phoenix metro markets have seen a negative affect on the volume of new transactions due to changes in the debt market. As a result, multifamily operators are getting creative and finding ways to push deals through closing despite this challenge. The rental sector has been supported by homebuyers who currently are not able to afford single family homes, which has created an increased demand for rentals across the Phoenix area. The robust and rapidly growing job market continues to attract businesses and employees alike to the area. This results in low vacancy rates plus rent increases making Phoenix a very strong real estate market with plenty of interesting opportunities for investors!

2. The benefits of investing in value add apartments

Value add apartments are a popular investment option due to their potentially higher returns and various exit strategies. In the current market, there is a disconnect between sellers and buyers. Sellers are often listing their properties at prices buyers are unwilling to pay. To help bridge this gap, sellers are often giving buyers the option for a seller carry. In most cases, this is going to be more favorable than obtaining financing from traditional banks or bridge lenders. While they are lucrative investments, value adds may be risky as interest rates rise, which could make selling or refinancing more challenging in future.

3. How to identify a value add opportunity when buying an apartment complex

Investing in undervalued assets can be a profitable way to increase your portfolio's value. If you are able to identify properties with high vacancy rates, under market rents relative to the unit's condition, poor oversight and expensive overhead costs – these assets can result in long-term financial freedom.

4. The due diligence process involved in buying an apartment complex

When purchasing an apartment complex, make sure to take advantage of the due diligence period. This is typically a 30-45 day window where you can evaluate financials and rent rolls, have physical inspections conducted on the building's infrastructure (roofing, AC units etc.), appraise it and research market reports. During this time frame any issues that arise could be negotiated with the seller for credits or repairs at closing. If both parties cannot come to an agreement, the buyer has the option to back out of the contract and their earnest money will be returned. To ensure your investment is sound, make it a priority to involve experienced professionals during your due diligence period!

5. Closing thoughts on the Phoenix multifamily market and how to get started in value add investing

The Phoenix metro markets are constantly changing and require frequent market research to stay on track with the monthly trends. By staying diligent, multifamily investors will persist to get deals to the closing table. Value add apartments will continue to be popular investments due to the financial returns and various exit options. Overall, the next 2-5 years in multifamily investing might be challenging, but with the correct strategies there are still opportunities to be successful.

If you are interested in learning more about investing in multifamily, schedule a call with us today!