A while back, I talked about multifamily income property investing risks. One of those risks is tenant availability. All the cap rates, gross rent multipliers (GRM), net operating income, etc. figures will not help an investor who does not know about risks and risk mitigation.
An investor needs to know how easy it is to get tenants and how he will get them. Let’s say you know a multifamily investment property has a GRM of 6.0. That’s a figure that represents today. If you invest in that property, you will have to maintain or improve that figure. In terms of tenant availability, think about the following questions:
- Where do I find tenants?
- Are tenants difficult to find?
- How are vacancy rates in the area?
- How do I attract them to my property?
- Why would tenants live here rather than somewhere else, whether it be another rental unit nearby or another town?
- Where will my tenants come from tomorrow?
This list is a starting place for you to think about what your tenant availability risk is.
Your answers to these questions will depend on your investment philosophy and your property. To make sure that you know that you can find tenants, you might invest in properties located near job sources or transportation links. You might renovate your multifamily to make it more attractive. Perhaps you know of a good property manager who has a good track record of finding tenants so you hire them to run your property.
In any case, be sure to ask yourself some of the questions above before you invest in a multifamily income property.