A location data driven analysis of multi family residential rental properties from the perspective of a MFR investor seeking cash flow deriving income property assets for portfolio investment.
Today, I am wearing the hat of a multi family residential (MFR) real estate fund investor looking to acquire MFR income investment property near Seattle and Miami. My primary drivers are to find locations that fit with my fund’s upper scale portfolio, that are in a growing area, and have strong rental income.
To find such gems, I will use location data to augment insights I get from other places and inform my real estate investment decision-making. To complete this analysis, I'll use Unacast's location data portal, which is free for MFR investors to try.
Through this exercise, we’ll explore several leading real estate investment and property management indicators across migration trends, income patterns and neighborhood recovery to help us do three things:
- Identify right fit tenants and target market - By looking at areas with depleting or growing population, net population flows and income differences, we can get a clearer picture of rental income opportunity for each property.
- Inform development decisions around typicals - If the building is around universities where students make up X% of tenants we don’t want to unbalance our investment portfolio with under-indexed studios and over-indexed 3-bedroom rentals and end up killing property cash flow.
- Determine the right commercial real estate tenants - By benchmarking location data and foot traffic across comp listings, adjacent points of interest and commercial property corridors, we can get a good read on how adding a given MFR asset to our portfolio can impact the overall health of our investment fund.
To get started, let’s have a look at the Seattle suburb of Bothell and see what we can discern about the local real estate market opportunity for MFR investment that will yield a high rental income to add to our fund portfolio.
MFR investment Opportunity with cash flow in Bothell-Seattle
Bothell, WA has consistently gained new residents post pandemic. Overall, people are moving to Bothell from areas with lower average median incomes compared to the local population. Outside migrants from other parts of Washington, people are moving to Bothell from Los Angeles County, CA and Maricopa County, AZ more than anywhere else out of state.
There are three multi family residential properties of note in the Bothell area, two of which cater to the middle of the market (North Creek and The Retreat), and one of which, The Villas, serves the upscale rental market.
It is worth noting as a starting point, that tenants at The Villas, commute less than a tenant at the other two multi family residential properties, where greater than 50% of comparatively lower income tenants travel six or more miles to work. So, an immediate correlation between workplace proximity and rental income opportunity for the multifamily residential investor looking for cash flow.
Residents of The Villas, who pay up to $5,000 per month in rent, tend to work from home or make the very short commute to the office to work with one the big biopharmaceutical firms in the Bothell area, including Lundbeck and Ekos Corporation. Residents of the mid market multi family residence properties pay about $1,400 to $2,200 rent per month but have to make that longer commute as part of their routine.
The neighborhoods around these properties have been affected by COVID, though there are signs of recovery, though not as widespread as we may like. Looking at our Neighborhood Insights dataset, we can see that as of the end of November 2020, total foot traffic in the area was down 20% to 60% compared to the previous year, with less than 7% of the area measured showing as recovered.
Central Bothell does show a significant return of workers, up 2% from the same time in 2019 (in a pandemic year). This area is home to many residential real estate, retail and construction firms.
Kingsgate-Kirkland has the strongest local bounce back in worker foot traffic, up 250% compared to the same a year previous. It is worth noting that Kingsgate is home to over a dozen software, aerospace and construction companies -- the sort of potential tenant with both the need and the means for more and better multifamily residential property.
In summary
This is just one example how how location data can be used to help a multi family residential investment fund to detect and measure potential MFR rental income property opportunity. The same tools and approach can be applied to single family rental as well as other rental property and tenant scenarios, commercial real estate, property management and operations, and many other investment classes of real asset and securities. Would you like to know more about how to use location data to help inform your next multi family residential investment opportunity -- talktous@unacast.com
