Multifamily Investing for Beginners: The What & How

Large apartment complex owned by multifamily investors

Investing in multifamily real estate is a great way to diversify your investment portfolio beyond stocks, bonds, and mutual funds. Returns generated from multifamily real estate are uncorrelated to the public markets and the volatility you see in the daily pricing of securities.

Many people shy away from multifamily investments because they don’t want to be landlords. What you may not know is that there are many ways to invest in this sector, and you don’t have to become a landlord to do it.

What is multifamily investing?

Multifamily investing is a strategy where you invest in properties with multiple housing units, such as apartment buildings or townhouses. Each unit typically has its own kitchen and bathroom, although there are some exceptions, like apartment complexes with microunits that share a kitchen.

Multifamily properties can fall under two different categories: residential real estate and commercial real estate. Duplexes, triplexes, and quadruplexes are generally considered residential real estate for financing purposes, while properties with more units are often financed as commercial real estate.

Is a multifamily property a good investment?

Real estate, especially multifamily properties, can be a great way to build wealth and generate tax advantaged, passive income.

Institutional investors have long understood the merits of holding commercial real estate in their portfolios. In fact, most endowments, pension funds, and asset managers allocate a significant portion of their investment portfolio to multifamily real estate. They have relied on this asset class to bolster portfolio returns, balance market uncertainty, and generate tax advantaged passive income.

According to research cited in a 2018 report by CBRE, the world’s largest commercial real estate investment firm, multifamily real estate provided the highest average annual total returns (9.75%) of any commercial real estate sector with the second-lowest level of volatility between 1992 and 2017. That statistic alone may be enough reason to consider investing in multifamily real estate.

There are a few other trends and factors that make multifamily housing, especially workforce housing, a wise investment choice:

Millennials are continuing to place a strong demand on rental properties. Renting is the most common form of housing for the largest generation in U.S. history, partially because rising home prices have put homeownership farther out of reach for many people of this generation.
Many baby boomers are shifting from home ownership to renting. Homeownership comes with ongoing maintenance, and many older adults are looking for more hassle-free living options in amenity-rich communities.
Data suggests the demand for workforce housing is increasing. Workforce housing includes properties that appeal to middle-income families. While construction of Class A properties that appeal to high-income individuals has increased in recent years, there is a shortage of new workforce housing units. Supply is not keeping up with demand.
Multifamily investors often enjoy better terms for funding than investors in other parts of the commercial real estate market. 2017 research from Real Capital Analytics found that the typical mortgage rate for multifamily was about half a percent lower than the typical rate for the overall commercial real estate sector.
Multifamily housing will always be needed. No matter what state the economy is in, people need a place to live. There is a baseline level of demand for most types of multifamily assets, especially workforce housing.

How do I start multifamily investing?

There are several different ways to get started in multifamily real estate. For many people, the most obvious option is to buy a duplex or triplex and rent the units out for income.

However, there are a few drawbacks to the duplex strategy. First, you need to amass a significant amount of capital to meet the down payment required to acquire the property. Second, you will become an active investor and need to devote a lot of time to being the landlord even if you hire a property manager to help you, which will eat into your profits.

An easier option is to buy into a real estate investment trust (REIT). A REIT is a type of publicly traded company that owns and operates commercial real estate. The process of buying a REIT is very similar to buying a stock or mutual fund, and you will not be expected to do hands-on property management tasks.

Investing in a REIT is a way to “diversify” into real estate. However, when you invest in a REIT, you do not actually own real estate, but rather you own a share of stock in a company that is in the real estate business. So you are right back to dealing with the volatility of the public markets.

A third option is to invest with a private equity real estate firm. In this strategy, you pool capital with other investors through a private equity firm to purchase one or more properties together as a group. You take a passive position in the investment, and the sponsor manages the investment and operates the real estate on behalf of the investment group. The investment strategy and risk level vary among sponsors.

Private equity firms allow you to make direct investments in commercial real estate. You can select a sponsor whose strategy you believe in and make an investment into a single asset entity that buys one specific asset, or you can invest in a fund they operate and end up owning an interest in multiple properties owned by the fund.

Investing alongside a sponsor is a great way to diversify into real estate. Investment amounts are typically lower because you are pooling your capital with others who join the investment group. In most cases, you must be an accredited investor to invest with a real estate sponsor.

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Nich Carlsen

Nich Carlsen joined the team at CEP Multifamily in 2023 as an Investment Analyst and holds primary responsibilities for sourcing, researching, and underwriting new markets and opportunities throughout the West. He is also responsible for analytics and research in support of Capital Markets, Asset Management, and Dispositions. Prior to joining CEP, Nich held positions in Research at Colliers and VTS covering multiple commercial property types.

In his spare time Nich enjoys golf, ocean fishing, travel, and supporting all things Oregon State athletics.

Nich graduated from Oregon State with a BS in Economics and is a member of the Urban Land Institute.

Jeff Anderson

In his role as Director – Capital Projects for CEP Multifamily, Jeff is responsible for the planning, management, and execution of all capital improvement and deferred maintenance projects, in addition to closely collaborating with the Property Operations team on asset preservation and best practices. Jeff joined CEP Multifamily in 2022 as part of our pursuit to expand our operational capabilities and to bring project management and asset preservation under our in-house suite of services to better serve our growing portfolio.

Prior to joining CEP, he spent over 14 years with Kennedy Wilson, a global real estate investment company, working in various Project Management roles for their Commercial Investment, Property Services and Multifamily divisions. Most recently he served as the Multifamily Group’s Construction Manager for their 20,000+ unit portfolio in the Western United States.

Jeff attended Washington State University where he graduated Magna Cum Lade earning his BA in Business with an emphasis in Real Estate and a minor in Finance.

When he is not working, Jeff can be found relaxing on Whidbey Island, working on house projects, skiing or enjoying the various water activities the PNW has to offer.

Mark Whitcomb

As Director – Property Operations for CEP Multifamily, Mark leads the day-to-day operations of CEP Residential’s expanding multifamily portfolio. Mark is committed to executing core processes and fostering the growth of his CEP Residential teammates in the pursuit of asset and property management alpha.

Mark began managing his first property in 2001, two years after beginning his career in property management as part of an on-site team. Over the course of the next 20+ years, he worked in multiple capacities and markets throughout Washington, Oregon, Montana, and Virginia with portfolios totaling over 2,500 apartment homes and 49 communities.

Mark has always been passionate about developing both people and leadership skills through local and national multifamily housing associations. He was recognized as Property Manager of the Year in 2016 by Washington Multi Family Housing Association (WMFHA) and went on to obtain his NAA CAM and CAPS credentials by 2017. He spent two years as a Chairman on the Career Development Committee through WMFHA before being nominated and awarded membership to the NAAEI faculty in 2018. This allows Mark the opportunity to mentor emerging industry professionals seeking their own designations.

Mark has been married to his wife, Shea, since 2019. Together, they enjoy travel, cheering for their Seattle sports teams, and exploring the outdoors of the Pacific Northwest with their two dogs.

Jessica Disman

Jessica Disman joined CEP Multifamily in January of 2022 as Director of Capital Markets and Investor Relations and is responsible for new investor acquisitions.

She brings over 25 years of experience in sales and marketing in the investment and real estate industry. Most recently she spent 8 years at Broadmark Realty Capital Inc. and Broadmark Capital LLC, raising capital for a series of private lending REITs that ultimately led to the IPO of the company.

Jessica attended Bryn Mawr College where she earned a BA with a double major in English and Fine Art.

An artist at heart, Jessica enjoys drawing and painting and has paintings in collectors’ homes nationwide.

Karin Christianson-Hart

Karin Christianson-Hart serves as VP Finance & Administration for CEP Multifamily. As a member of the CEP Team, Karin oversees all finance, HR, risk management and administrative support for both CEP Multifamily and CEP Residential, the in-house property management division.

Karin has many years of property management experience from small startup firms to a large regional company. Problem solving, tactical management of multiple teams and a working knowledge of day-to-day business operations are strengths that Karin brings to the table. Other areas of expertise include captive insurance management and family office accounting for principal partners.

Karin earned bachelor’s degrees in Accounting and Business Administration from Central Washington University.

With a heart for missions Karin has most recently served on the Board of Hands for Peacemaking, a nonprofit that provides high efficiency wood burning stoves and clean water systems to the Mayan population in the highlands of Guatemala. Financial management support has also been provided to the Snohomish County Economic Alliance in its infancy along with a nonprofit football academy.

Outside of work Karin enjoys riding motorcycles, camping, and travelling with her husband.

Shawn Hoban

For over three decades, Shawn has been responsible for establishing and growing each of the operating businesses in The Coast Group of Companies and Hoban Family Office. It all started in 1987 when he co-founded Coast Property Management alongside his brother Tom after identifying the need for a high performing, values-based property management company. Coast has long since grown into The Coast Group which is a vertically integrated, privately owned family of real estate companies. Coast is one of the region's largest and most respected real estate services firms of its kind with offerings in property management, facility services, specialized construction, advisory, and investment services.

Shawn is an integrator and strategist for the Hoban's various ventures with a particular gift of taking complicated situations and making them executable. A leader with strong character, Shawn also
possesses a competitive streak that has shaped the success of their ventures together.

The Hoban Family Office, the holding company for the operating businesses, brings innovative ideas to the commercial real estate industry through Coast Innovation Center while serving the charitable causes of the Hoban family and the Coast Group. He is passionate about identifying and developing talent to
support their businesses, while mentoring the next generation of leaders inside and outside of his family.

His service and awards include Top 40 Under 40 Business Executive by the Puget Sound Business Journal, Director for The University of Notre Dame Alumni Association, Archbishop Thomas J. Murphy High School Board of Trustees Chair and Board of Regents, Fulcrum Foundation Board of Trustees, Vistage, Entrepreneur’s Organization (EO), and many other community organization throughout the Pacific Northwest and U.S. The brother’s ventures together earned them two very prestigious awards: The Washington State Family Enterprise Institute’s Family Business of the Year and The University of Notre Dame Alumni Association of Seattle co-alumni of the year.

Shawn holds a Bachelor’s degree in Business Finance from the University of Notre Dame and is both a Certified Commercial Investment Member (CCIM) and a Certified Property Manager (CPM) with the Institute of Real Estate Management (IREM).

Shawn and his wife, Kathie, enjoy travel and outdoor recreation on the Puget Sound while following the active lives of their four adult daughters and a growing generation of grandchildren.

Tom Hoban

Tom has over thirty years of experience as a property manager, real estate advisor, and investor. In 1987, he co-founded Coast Property Management alongside his brother Shawn after identifying the need for a high performing, values-based property management company in the market. Coast has long since grown into The Coast Group, which is a vertically integrated, privately owned family of real estate companies encompassing property management, facility services, specialized construction, advisory, and investment companies. Today, The Coast Group is one of the region’s largest and most respected
real estate services firms of its kind as it is able to leverage the different companies' resources to provide the best possible returns for clients.

Built as an extension of their humble servant leader view of themselves, the Hoban brothers and their executive leadership teams have become synonymous with excellence, innovation, and reliability. Along the way, the brothers have been recognized for their professional accomplishments and work in the communities they serve, earning them the co-alumni of the year award from the University of Notre Dame alumni association and The Family Enterprise Institute’s Washington Family Business of the Year.

Over the years, they invited others who possessed complimentary if not superior talents to join them as partners and co-leaders in the Coast Group of Companies. In 2017, they formed The Hoban Family Office (HFO) to create a platform for innovation (Coast Innovation Center), talent development, and leadership in service to the Coast Group of Companies, their families and the communities they serve. It also serves as their charitable arm, with a focus on service to the poor and vulnerable and development of tomorrow’s leaders.

Tom leverages his vast network, engaging personality and refreshingly transparent approach into many venues, including his long-running column in the Herald Business Journal, as a freelance writer and as a guest speaker or lecturer all while serving on several boards or advisory functions, including Santa Clara University Real Estate School Advisory Board, Washington State University – Everett, University of Portland board of trustee’s, The Washington State Governor’s Affordable Housing Advisory Board, The
Commercial Broker’s Association of Puget Sound, Archbishop Murphy High School (Everett, WA), The Boys and Girls Clubs, chairman for the Snohomish County Airport Commission, The City of Everett
Economic Development Advisory Council, and others. The brother’s ventures together earned them two very prestigious awards: The Washington State Family Enterprise Institute’s Family Business of the Year
and The University of Notre Dame Alumni Association co-alumni of the year.

Tom graduated from The University of Notre Dame with a BA in Finance. A former coach, scoutmaster, and basketball referee, in his spare time today Tom continues to play recreational basketball, remains active in his church and enjoys time with his wife, two sons, and daughter on the Puget Sound.

Josh Jansen

Josh Jansen has over 20 years of multifamily investment experience, both as a broker and principal. As CEO, President, & Managing Partner of CEP Multifamily (CEP), Josh leads the firm’s strategic growth and acquisition, disposition, and asset management functions. Since joining CEP as a principal in 2012, Josh has played an integral role in growing the firm’s acquisition and capital raising volumes tenfold. Prior to joining CEP, Josh was a top national multifamily broker at Sperry Van Ness for multiple years.

Josh is active in his community and spent 9 years as a volunteer varsity football coach at a local high school. Josh also served as a founding board member of the Private Enterprise Coalition of Snohomish County, and was the Founder and Board Chair of Wildcat Football Academy (WFA), a Mill Creek, WA-based 501(c)3 nonprofit youth sports organization.

Josh attended Occidental College in Los Angeles, where he earned a BA in Politics, as well as All-American honors as captain of the football team.

Josh, his wife Cheryl, and their two children enjoy traveling, hiking, and snow and watersports.

Mike Harmon

In 2004, Mike joined the Coast Group of Companies as CFO and Managing Partner of Coast Equity Partners. Mike’s role is to drive the growth of Coast Equity Partners through the acquisition of investment properties that produce outstanding returns for our clients.

Mike brings many years of business leadership, entrepreneurial drive, and real estate experience to the table. He has held critical roles in the strategic management of high growth companies and early-stage technology start-ups. From raising capital on Wall Street to buying his first rental property while still in college, Mike brings a unique broad range of talents to Coast Equity Partners.

Mike’s entrepreneurial spirit is grounded in a solid business background. He has designed and managed the development of several mission-critical business systems for fortune 500 companies, participated in

the creation of new businesses and nurtured new growth opportunities for existing businesses. Mike has created and grown departments, successfully identified, negotiated, and closed strategic partnerships, managed key client relationships and secured new capital investments for the companies he has helped lead.

Since 1992, Mike has been engaged in the identification, acquisition and rehabilitation of real estate with excellent investment potential. His portfolio of properties includes residential holdings as well as rental properties in various markets throughout the Pacific Northwest and United States.

Mike holds a BS in Finance from San Diego State University and an MBA with concentrations in Marketing and Management from the University of Notre Dame.

Mike enjoys travel, youth coaching, winter sports, water recreation, golf and fishing. He lives with his wife and four sons in North Seattle and is active in his church, children’s schools and local community.

Multifamily Investing for Beginners: What It Is and How to Get Started