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Page 10 — Multifamily Properties Quarterly — August 2019 www.crej.com The nation’s #1multifamily lender is lending in your backyard. Chase is known for our fast and efficient loan processing. It’s what has made us #1 in multifamily lending nationwide. With great rates, low fees, and a deep understanding of the local market, our team gets apartment loans done right. Catherine Murphy Executive Director (303) 512-1283 catherine.murphy@chase.com Josh Tidwell Executive Director (303) 244-3403 joshua.m.tidwell@chase.com Credit is subject to approval. Rates and programs are subject to change; certain restrictions apply. Terms and conditions subject to commitment letter. Products and services provided by JPMorgan Chase Bank, N.A. #1 claim based on 2018 FDIC data. ©2019 JPMorgan Chase & Co. All rights reserved. Chase is a marketing name for certain businesses of JPMorgan Chase & Co. and JPMorgan Chase Bank, N.A., Member FDIC. 530052 MULTIFAMILY LENDING Low Fees | Great Rates | Streamlined Process W e as brokers are asked the question quite often by our clients if they should be looking at other markets to invest in.This is not an easy question to answer, as there are several questions that need to be addressed and risk factors that need to be dis- cussed in order to make that decision. Investing out of state can be very chal- lenging but also be a great decision yielding more return on investment, if done properly. Some of the factors that are leading people in Colorado to even consider looking elsewhere is where we are at in our cycle.We have seen a very long run of high rent growth and appreciation of all income-producing real estate, but especially in the mul- tifamily sector.What investors could afford five years ago they simply can’t make sense of today. Many buyers raise money for deals and need to offer investors a preferred return that can be a struggle in a market like Denver, Seattle or Austin,Texas.This has driven them to look at other markets and con- sider the risk of investing out of their backyard. Some factors that need to be taken into account when looking at investing are the market fundamentals.What was that market like in the recession? What’s the local economy like? Job growth? Population growth?What kind of management companies are in the market? Rental growth?Vacancy rates? What sort of debt can you obtain? Are there any housing regulations that are not similar to your home market? Real estate taxes? All of these things should be considered during the process of looking at an unfamiliar market. When you invest out of state, you must overcome your lack of familiarity with the out-of-state real estate market and with its local economic condi- tions, both at the city level and the neigh- borhood level. Real estate can change neighborhood to neighborhood and in some cases block to block. You won’t have the same inti- mate knowledge of a distant market that you have of the market where you live. You will need to do your research and talk to as many people as possible in the industry or not in that city to gain as much familiarity as possible. The No. 1 key is finding good con- tacts to help educate yourself.You will need contacts such as real estate agents, property managers, lenders and handymen – the people who will be the key to your success or failure. Some of these people may have reports or access to the economic questions you have about the city that you can read to help familiarize yourself with the area.They also may have neighborhood reports that will help you learn about the different submarkets in the city. Two keys to many out-of-state inves- tors’ success are to find and develop great relationships with key brokers and property managers in the market. You’ll need them to help find deals and learn the market. Using an out-of-state broker who has no knowledge of the area is not a good idea. A great man- ager is the key once you have found an asset you like – to keep it full and keep your costs in line. Even with a great broker and good property manager, there is still work to be done. Managing the manager is a job within itself.Visiting the property, even sometimes unannounced, is a good idea to check in on things. Another thing to consider when buying out of state is the type of debt offered. Many second- and third-tier cities don’t have debt options as Colo- rado does.We have local, regional and national banks ready, willing and able to lend on multifamily property. Fannie and Freddie consider our market a top- tier market, which means better terms. This is not true in all markets. Figure this out before making an offer so as to not to waste time or money. Something that might help ease the uneasiness of buying out of state is buying in a familiar place. Maybe where you went to college. A place you vacation to.This helps with the famil- iarity of the market and, hopefully, with having some contacts already in place. Plus, you can write off for tax purposes your trips to see your investment. Lastly, I would always caution a first- time investor from buying out of state. There are many things that investors learn on the fly, and being able to have an investment in your hometown always can help mitigate some of those problems.You learn what you are look- ing for from a manager and a style you like to operate your investment. I would suggest starting smaller and local if you are a new investor, even if the return may not be as attractive. Sometimes investors can get caught in not seeing that their own backyard is the best place to invest.Yes, prices are higher than they were five or seven years ago, but that is the same as any- where in the U.S.There are still oppor- tunities for great investments in the multifamily sector in Colorado. Plus, if the market does soften, I would always rather own closer to home than far away. ▲ To invest in multifamily markets out of state or not? Broker Insights Adam Riddle Co-founder/ principal, Nexus Commercial Realty Cap Rate