Step 1: Narrow Your Search Criteria

Passive income is a driving force for a multifamily investment strategy. However, it’s easy to take on unnecessary risk or acquire a property that doesn’t fit your investment goals, risk tolerance, and financial situation if the amount of potential passive income is your only search criteria. 

Knowing how to find multifamily properties and doing so effectively are two different things. Not every method for finding multifamily properties is useful to every real estate investor. Zeroing in on the type of property you’re after can reduce the time you spend seeking the right opportunity. 

Questions to ask yourself: 

• What markets do you want to invest in?
• What submarkets within those markets are particularly appealing?
• Is there anything you want to avoid? 
  • I.e., low-income housing, Class C properties needing extensive repairs, etc. 
• How much can I use as a downpayment? 
• How much am I willing to spend on a property? 
  • If the price tag of properties in your chosen market is above what you can afford, forming a real estate partnership or engaging in a syndication may be more viable for you. 
• How large of a property are you willing and able to take on? 

Before you begin investing in multifamily properties, you need a clear vision for the property best suited for you. This can move you through the entire process exponentially faster.

Once you’ve answered the questions above, identify the types of multifamily properties that match your risk tolerance and interest level.

Types of Multifamily Properties

Multifamily properties come in a wide variety of shapes and sizes. They also serve different purposes – both for tenants and investors. The better multifamily investors understand these uses and types, the easier it will be to locate ideal properties. 

Property Class  

• Class A Multifamily: Highest quality buildings boasting a pretty price tag. Typically needs little to no remodeling and comes with a range of amenities. 
• Class B Multifamily: Properties in sought-after areas in need of modern updates. Often have the potential for a substantial return. 
• Class C Multifamily: Oldest of the three classes in less sought-after neighborhoods. Typically plain and considerably run down. 

While the above will help you get a general understanding of property classes, these are basic definitions that can fluctuate in different markets. To gain a greater understanding, read our guide on property classes in CRE. 

Style of Building

• Low-, mid-, and high-rise apartment buildings
• Townhomes
• Condominiums
• Duplexes, triplexes, and quadruplexes

Building style is less relevant than property class but still valuable to consider. Different styles require certain aspects of maintenance unnecessary in other styles, which can ultimately affect your bottom line. 

For example, duplexes and triplexes have more prominent horizontal footprints than apartment buildings. This imposes more significant costs for roof maintenance and landscaping on such properties.  

Building Use

• Mixed-use developments
• Opportunity zone properties
• Retirement/nursing homes
• Student housing
• Low-income housing

Multifamily property use can also affect your overall return. For example, student housing is more likely to need regular repairs compared to a Class A mixed-use high rise. 

While you can adjust the building’s use, this may not be financially feasible or realistic. Understanding the type of risk you’re willing to take before seeking out investment opportunities can reduce your personal and financial stress.

Step 2: Decide Between On- and Off-Market Multifamily Properties 

Now that you know more specifically what you’re after, it’s time to decide to look for on- or off-market properties. Below are some specifics to help you decide based on your narrowed-down search criteria.

Seasoned investors having undergone several real estate transactions (be it multifamily or otherwise), may be better equipped to pursue off-market properties. 

Meanwhile, new multifamily investors may be better suited to on-market properties until the buying and selling process becomes more familiar. Alternatively, finding a seasoned investment partner can be beneficial if you’re more interested in off-market properties.

Step 3: Use These Methods for Finding Multifamily Properties

Now for the meat and potatoes: below are specific ways multifamily investors can learn how to find multifamily properties. Use the methods you think will be most beneficial now that you have a clear understanding of exactly what type of multifamily property you’re seeking. 

Use an MLS: Probably the most obvious method for finding on-market multifamily properties is to browse through MLS listings on sites such as: 

• PropertyShark
• LoopNet
• PropertyRadar
• CrexiCrexiCrexi
• Zillow (use the multifamily filter)

Word of mouth: Attending real estate investing conferences and networking events can help grow your network and open doors to both on-market and off-market properties. 

Work with a broker: Brokers are some of the first to know of properties coming on the market, giving you an added edge in the competition over sought-after properties.  Finding

Directly contact building owners: This is yet another place where networking comes in handy. You likely know other multifamily investors who own buildings fitting your multifamily investment strategy. They may have leads for similar properties even if they aren’t willing to sell. 

Call rent signs: If you have your eye set on a certain property but don’t know the building owner, call the number on the for rent sign or listing. This can help you locate the owner, or at least get you one step closer to them. 

Use an online CRE database: Commercial real estate databases store information about properties off the market, making it easier for you to identify one that suits your needs. Such databases include Reonomy, Moody’s Analytics Catalyst, and CoStar.  

Find a wholesaler: Wholesalers purchase properties at a discounted price, and then resell them for a profit. While they may have a host of properties to choose from, do your due diligence to ensure the property's value is worth what the wholesaler is asking for. 

Look through county tax websites: Tax and city or county property websites can help you identify real estate that may fit into your multifamily investment strategy. 

Attend auctions: Some foreclosed properties will be listed on an MLS, while others won’t be. If you want to know how to find multifamily deals, attend auctions. You may find the gems that aren’t listed on MLS sites and swing a below-market-value deal. 

Some of the methods for how to find multifamily properties will be relevant to your situation while others won’t be. Use your judgment based on the specific type of property you’re looking for and adjust your search criteria as needed.

[Bonus] Step 4: Secure Multifamily Financing and Seal the Deal

The next obvious step in the process of finding a multi-unit property is to secure your multifamily financing and move forward with the transaction. Although you may have enough funds to purchase the building outright, by leveraging financing you can stretch those funds by purchasing more than one property – thus maximizing your return. 

Utilizing a hard money lender for multifamily financing is quick and easy. A small balance commercial loan through Revolution Realty Capital can help you close in 10 days or less with rates starting at 10.5%. 

If learning how to find multifamily properties has you stressed over the time and work you’re going to have to put in – there’s another option available. Some investors are better suited for a hands-off approach by becoming a private lending partner with a trusted lender, like Revolution Realty Capital. 

However, if you consider yourself a hands-on investor, always do your due diligence before investing in multifamily properties.