Brian explains that apartment buildings are valued as businesses based on the profit they generate, whereas single-family homes and properties up to about fourplexes are valued on comparables. Because multi-family is valued on profitability, investors can increase the building's value by improving operations and efficiency, and banks will reward that work with higher valuations.
He believes that rising rates and recession fears cause unsophisticated investors to back away, which creates opportunities for educated buyers with long-term plans. Rather than dwelling on whether prices might drop further, he focuses on whether the property will be worth more in five to ten years and if he can bring value to it over that period. He recently went firm on a property in Port Credit where there would normally be many competing offers.
Brian advises treating each building as a separate franchise and approaching the purchase with a five-to-ten-year business plan rather than a short-term horizon. He finds many investors lose deals by focusing too heavily on shaving the purchase price, when they should be evaluating the long-term value they can bring to the property through improved operations and management.
He emphasizes identifying the demographic in your area that is being underserved and then designing your units and renovations to specifically attract that group. This focused approach ensures that when units become available, the right tenants are knocking on your door because the property delivers value tailored to their needs and lifestyle.
