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Commercial Multifamily Sector

Multifamily real estate properties from fourplexes to complexes

Since 1951

Commercial Real Estate

Commercial real estate is any non-residential property used for commercial purposes. Commercial real estate consists of office, industrial, retail, multifamily, hotels, land, and special purpose properties.


BY Austin Sharp, CCIM   |  

Texas Multifamily Properties

Multifamily properties are particularly a good bet even in Amarillo, Texas. As a matter of fact, apartment properties come in all shapes and sizes. From urban complexes to sumptuous multidwelling units in the suburbs. Multifamily dwellings can be  classified as housing where multiple separate units for residential tenants are contained within one building or multiple buildings within a complex. A common form is an apartment building, but this commercial real estate sector includes duplexes, triplexes, fourplexes, semi-detached houses, townhomes, apartment communities, and mixed use buildings. Usually, however, an apartment fourplex or larger is considered commercial real estate for an investor.

Due to increased urbanization in the United States, multifamily properties have become more structured, more costly and more diversified investments. Some of the largest institutional investors have reimagined the multifamily sector from residential assets to one of the primary commercial real estate asset classes.

Leases on multifamily apartment assets adjust quickly to market conditions and are shorter term (one to two years) than office and retail units providing less long term stability than office building investments. Nevertheless, multifamily commercial real estate properties are sensitive to competitive pressures from newer apartments in the market.

The Types of Multifamily Structures Include:

  • Garden Apartments: The garden apartment, for instance, appeared on the scene in the 1960s and 70s. These are three to four story buildings without elevators and with surface parking.
  • Midrise Apartments: Midrise apartment complexes are five to nine stories with an elevator. They are often built on undeveloped land that is enclosed by other types of developments. Termed “urban infill spots”, midrise apartments mostly are filling in the gaps of metropolitan areas that are already built-out.
  • High-rise Apartments: High-rise apartment complexes generally have more than 100 units and are professionally managed.

How to Analyze Multifamily Properties

  • Cap Rate: Cap rates give you a general idea of what the future value of a property will be. The lower the cap rate the higher the price for the investment property. Actual cap rates may differ between properties due to differences in location, access, terms, and market factors.
  • Replacement Value: Calculating the replacement cost is a common method of property analysis. Usually these are ballpark figures based on estimating the cost per square foot. It is important to factor in the type of structure, construction method, and building location when estimating replacement costs.
  • Local Economy: Examine the local economy for micro trends. Labor factors, such as the closing of a manufacturing plant or the resurgence of an oil boom may effect the demand for housing.
  • Macroeconomic Trends: Large trends that cause the whole commercial real estate market to bobble, like the Great Recession that occurred between 2000 and 2010, known as macroeconomic trends and effect access to financing.
  • Value-add Properties: Commercial real estate investors sometimes prefer value-add properties because of the prospect of increasing cash flow through renovation, adding amenities, or changing a properties use such as converting a downtown warehouse into loft apartments. These properties are usually higher risk investments but they can be lucrative in the right market conditions reaping the benefits of higher cash flow and property values.

Mays Provides the Background Comps

Mays provides vital information to help you make an informed decision regarding your commercial real estate investment. We give you useful data about the construction of the property, such as the year the property was built, if there have been any updates to construction, as well as unit sizes. We provide ratios of rental and vacancy rates to ensure the location is a proper investment for potential buyers. In addition, Mays locates information about licensing and operating expenses of the property and looks out for possible competition in the surrounding area. Along with this, we provide a variety of reports:

  • Market Reports: Firstly detailed research on market shifts, changes in technology, and the economy near the property.
  • Submarket Reports: Data on specific submarkets or neighborhoods within a specific metro market.
  • Metro Reports: Historical trends that are a foundation for any precise market analysis.
  • Rent Comps: Rent comps help investors evaluate property performance as compared to its competitors.
  • Sales Comps: See properties similar to the one you want and find out what they have sold for before making financial decisions.
  • New Construction Comps: All in all, stay informed about upcoming, completed, or current projects that are under construction in the area they you are looking to purchase property.

Information and Resources for Mays in Amarillo, TX

For more information about the resources we offer commercial real estate property investors, see Mays Market Reports and Mays Property Reports. Or if you need specific information or have a question, visit our Question and Answers or Contact us.


Sources

Williams, S. (2018). What is Commercial Real Estate? The Definition of CRE.

CrowdStreet. (2018). The Definitive Guide to Commercial Real Estate Property Types – CrowdStreet.

En.wikipedia.org. (2018). Multi-family residential.

Westwood Net Lease Advisors LLC. (2018). What Makes Multi-Family Commercial Real Estate Properties Exceptional?

Realty Mogul. (2018). Commercial Real Estate Property Types | RealtyMogul.com.