As a multifamily real estate investor in Chicago or anywhere in the United States, you might be considering investing in properties for short-term gains. Short-term gains refer to the profits made from buying and flipping a property within a short period time. In many cases, it can all happen in less than 6 months. These type of deals aren’t what you would usually call “buy and hold” properties.
While short-term gains can be lucrative providing a reliable income, they also come with their own set of challenges and risks. In this post, we’ll discuss what a multifamily real estate investor needs to know about investing in real estate for short-term gains.
1. Do Your Due Diligence
Before you ever put any skin in the game investing in multifamily properties, it’s essential to conduct proper due diligence on the property you’re looking to buy. This includes thing like researching the local real estate market, the property’s location, and running the numbers for the potential return on investment (ROI) to make sure the deal makes sense.
- Researching how strong the local real estate market is will give you an idea of the demand for properties in the area. If the market is hot, you may be able to sell your property for a higher price, resulting in a higher return on your money.
- The property’s location is also critical to your overall success. It would be in your best interest to invest in a property located in a highly desirable location that attracts lots of potential buyers and renters. This likely includes properties located near the best schools, parks, public transportation, groceries, or other amenities.
- Finally, analyzing the potential ROI is what it all boils down to. You should consider the property’s purchase price, rehab costs, value plays, and potentially higher selling price. This will give you an idea of the projected profit you can may make from the investment as a whole.
2. Have a Rock Solid Investment Plan
Investing in multifamily real estate for short-term gains requires a solid investment plan. This plan should outline your overall investment goals, the type of property you want to flip, your budget and access to capital.
Your investment goals could include the amount of net profit you want to make, the timeline for that investment, and the level of risk you are willing to take on to make it happen.
The type of property you are looking for may include being fully occupied, 60 – 100 units, or a property located in a desirable location. Or, maybe you want to revitalize a community by buying vacant buildings, rehabbing the entire building and placing new tenants in a new place they can call home.
Giving serious thought and planning to your budget should also be considered when developing your rock solid investment plan. This includes the purchase price of the property, renovation costs, and any other expenses associated with making the deal work.
3. Understand the Risks
Investing in real estate for short-term gains comes with its own set of risks and it’s going to be vital to your success to get a good idea of what they are and understand risks before doing any deal. These risks include market fluctuations like price changes, unexpected rehab costs, and other unforeseen expenses.
Market fluctuations can impact the potential ROI of the investment and is very important to understand. If the market experiences a downturn, you may not be able to sell the property at your desired price, resulting in a lower ROI or even possible loss.
These “unexpected” renovation costs and unforeseen expenses seem to pop up more often than not and will impact the overall profitability of the investment. It’s therefore essential to have a contingency plan in place which includes emergency funds, to cover these costs and ensure that the investment remains profitable.
4. Work with a Professional
Working with a professional real estate broker or partnering with another investor can be beneficial to add to your network as a multifamily real estate investor looking for short-term gains. A professional buyer can provide valuable insights into the local target market, help you find potential properties, and negotiate the purchase price.
At Global Abundance LLC, we work with local investors in various markets nationwide to help them maximize their portfolios. Whether you want to invest for short-term or long-term growth, our team can provide you with the data, answers, and properties you want to purchase.
5. Consider Financing Options
When investing in real estate for short-term gains, it is essential to consider financing options. This includes traditional bank loans, private loans, hard money and even crowdfunding.
Traditional bank loans may be difficult to obtain for short-term investments, as they often require a more extended repayment period. A hard money loan, based on the type of deal and time sensitivity could be the missing piece you need to push a deal through the finish line. Private loans from friends and family quite often, is how a lot of people actually get started investing in multifamily properties. Crowdfunding is also an option for short-term investments, as they often have shorter repayment periods and more flexible terms.
6. Have a Exit Strategy
Reaching the finish line in any business endeavor is the ultimate goal, would you agree? Knowing your exit strategy is crucial part of the process a multifamily real estate investor seeking quick short-term gains. Additionally, having multiple backup plans within your exit strategy is equally vital.
Real estate markets can be unpredictable at times, so it’s prudent to prepare for unforeseen circumstances that might obstruct your initial plan. These backup plans could involve adjusting the sale price, exploring alternative selling methods like auctions or lease options, or even considering holding onto the property longer if market conditions are unfavorable.
Remember that an effective exit strategy should align with your investment goals. Are you seeking quick short-term gains or long-term wealth accumulation? Your investment objectives will influence your decision-making process while developing the most suitable exit strategies for your multifamily real estate holdings.
Investing in multifamily real estate for short-term gains can be a lucrative opportunity for multifamily real estate investors nationwide. However, it can also come with some risks. Before making a purchase, you will need to do your research, develop a solid investment plan, make sure you have an understanding of the risks, work with a professional, explore your financing options, and have an exit strategy.
Furthermore, consult with professionals who have experience in multifamily real estate investing and seek their guidance throughout the entire investment process. Their expertise can help refine your exit strategy based on their industry knowledge and insights. By following these tips, you can increase your chances of a successful and profitable investment here in Chicago or in your specific market across the country. Are you interested in multifamily investment properties in the Chicagoland area for short-term gains?
Reach out to our team at Global Abundance LLC to learn more about what we can do for you! 800-953-2124