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What Is A Good Return?

Multifamily apartment communities have been historically stable investments. This has led to increasing interest in the asset class and increased valuations. With increased valuations some metrics for potential profit and return on investment have decreased.

Learning multifamily investors have easily achieved 20-30+% returns in the past may bias your expectations for the future. If these numbers are no longer the norm, what is a good return? And does a good return mean it is a good deal?

How do you know if a deal is a good deal?

There are many ways to evaluate an investment including equations, formulas, ratios, and financial models . Ultimately, you are determining if the risk you are undertaking is worth the potential reward.

For newer investors, reviewing all this data can be overwhelming and time consuming. Unfortunately, there is no single number or formula that can give you a yes or no answer so this review must be done.

You can set minimum standards that filter out investments that would not meet your needs. Investment opportunities that meet these minimum criteria can then be evaluated more in depth to see if they are a “good deal”.

This process is called underwriting. It is a full analysis of an investment opportunity to determine if it is worthwhile. But first, how do we determine screening criteria to decide if an opportunity is worth the time and brain power needed for a full analysis? It starts with your goals.