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Ready to invest, but unsure of where to start? You’re in the right place. Historically, our market has been a magnet for investors seeking cash-flow investments. With attractive property prices (compared with major markets), affordable cost-of-living and steadily low vacancy rates, Bakersfield continues to be a successful first step for many new apartment investors.
Regardless of your experience level, the step-by-step plan below will help guide you through the transaction process. There is one key task to complete before you start hunting for investment properties: partner with a multifamily real estate expert like Marc A. Thurston.
Why do I need a multifamily specialist?
Apartment real estate is significantly different than other specialties—that includes general commercial real estate and (especially) residential real estate.
An experienced multifamily agent must be locally familiar with:
- Submarkets (apartment neighborhood clusters)
- Rent Rate History
- Vacancy Rates
- Various Apartment Structures
- Rules and Restrictions Unique to Multifamily Listings
All these factors will impact the profit margin of your investment property. To ensure that you have all the details needed to make an informed decision, I strongly suggest you work with an experienced agent like Marc A. Thurston.
Step One - Prequalification & Market Research
- If you require outside financing for your property purchase, you will need to determine the amount of the qualifying loan. This provides me with the information needed to identify the type, size and location of properties within your budget. Next, I use several methods to evaluate prospective properties:2
- Submarket: I have divided the Bakersfield apartment real estate market into six geographical zones. I then track the average prices and market activity of all multifamily properties within the boundaries.
- Comparables (or “Comps”): This measurement tool is based on a survey of the area near to the property in question to determine if the asking price is consistent.
- Price Per Unit: By dividing the property price by the number of apartment units, I create a more accurate property-to-property comparison than price alone.
- Gross Rent Multiplier: The ratio of the sale price and annual rental income (before expenses) will yield a number that represents the number of years it would take for the property to pay for itself in gross received rent.
- Cap Rate: A formula to determine the rate of return on an investment property based on expected rent income.
Step Two - Buy the Business
Once you have decided on the property you wish to purchase, I will help you to write the most attractive offer. During the negotiation, I will provide you with up-to-date information, so that you can make an informed decision on how to proceed. Upon acceptance of your offer, I will work with your lender and inspectors to make sure they have complete access to the property and the financial information about the performance of the building. During this escrow period, you will have multiple contractual time frames to meet, so it is critical that I stay in contact with each other during the process.