Understanding Investment in Multifamily Residential Estate with Ali Ata

Owning real estate as property is undoubtedly one of the best kinds of investment one can make. However, experts in handling finances such as Ali Ata of AAIM Development emphasize the need to think diligently before putting in one’s money. A multifamily real estate, they suggest, is a good place to invest.  

A multifamily real estate property refers to that kind of property that encloses several housing units. Some of the commonly known properties of this category include condominiums, duplexes, apartments, and townhomes. However, irrespective of the type of multifamily residential estate one chooses to stay in, investment in this category will only yield high profits with time.

There are three basic things, according to experts such as Ali Ata that need to be closely followed while making an investment in this genre of property. The first thing is to identify the NOI or the net operating income. This is basically the difference between the estimated income and the estimated expense on a monthly basis. For this, one will need to know the approximate expense that will be incurred from such property. These expenses would be in the form of maintenance.

On the other hand, one would also need to calculate the source of income through this property, such as the storage and parking fees, the rent if any, etc. One would also need to get an understanding of the probable expenses in the neighborhood, in case, it is not possible, then the ideal method to use is the ‘50% rule. 

By virtue of this, the expected income is divided by two and considered as the approximate expense. This difference between expected monthly income and monthly expense is known as the net operating income or NOI.

The next thing to calculate would be the amount to be paid towards mortgages. The monthly cash flow is calculated at this stage by deducting the mandatory payment of mortgages from the NOI. This is helpful in getting clarity on the profitability of the investment. Ali Ata opines in this regard that posts Covid-19 situations which saw a dip in this investment type, there is likely to be an urge in it and therefore the most ideal time to go ahead and invest in a multifamily residential estate.

His property development firm, AAIM has always been instrumental in giving the right kind of suggestions and making wise moves when it comes to real estate development or business investment. Ali thinks this to be his way of giving back to society, which is why he supports the need to find out one’s capitalization rate.

Popularly called the cap rate, this is the calculation that is helpful in gauging the ROI (rate of interest) of this investment type. The simplest means of calculating this is to multiply the NOI by 12 and divide it by the company’s current market value. The ideal percentage for the cap rate to be is 5-10%. Anything away from this could either result in inadequate yields or high risks. 

Thus, having appropriate calculations and knowledge prior to an investment in a multifamily residential estate is essential. Primarily because all kinds of investments are subject to market risks, it is only wise to invest in various different types of real estate. This is done so that the rise and fall of the market do not massively fall heavy on your investment. This is the best way to waive off the risks that are attached to such investments. One does not have to remain worried about the returns that are likely to come.

Achieving such diversification can be done by considering two factors: Geography and Class. The location of a real estate property is one of the key factors in gauging the profitability of the property. The development of the neighborhood of the real estate plays a major role in this regard. Thus investments should be made in a number of places to be able to shield oneself from any major loss.