To make sound investment decisions, it is important to understand the risks and opportunities associated with any investment opportunity. At Roers Companies, we pride ourselves on the investor experience from start to finish. That includes ensuring our investors are well informed about the benefits, risks, and uses of their capital when they choose to invest in a Roers Cos. project.
Of the thousands of investors Roers Cos. partners with, nearly every investor has asked the same important question: What is the risk?
General Risks Associated with Multifamily Real Estate
Fluctuating Economic Markets. The broader financial environment is one of the first risks multifamily investments face. Interest rates and inflation can affect personal finances and influence the decisions people make about their money. The financial environment also affects a business’s ability to take on new projects and control costs. Because construction and development are multi-year undertakings, institutions must remain vigilant in underwriting and resilient in changing markets to work towards projected investment outcomes.
Absorption. Absorption is the rate at which a building is filled, or “leased up,” and is especially important in multifamily real estate. It can be unpredictable, which makes research and strong data supporting a project’s location crucial. It is also directly correlated with investor returns: the faster a building is absorbed, the sooner investors may begin to see returns. When evaluating an investment opportunity, factors such as vacancy rates, supply, and competitors help gauge a property’s ability to be absorbed. A strong lease-up strategy can help mitigate the risk of low absorption.
Construction Timelines. Construction timelines can significantly affect real estate investments. Construction is collaborative, and when a project involves many vendors and trade partners, timelines can be disrupted, affecting investor returns. Careful planning, strong project management, and established contractor relationships are essential to minimizing delays and keeping projects on track.
How Roers Cos. Mitigates Risk
While a degree of risk is inevitable with all investments, how an institution is positioned to manage risk helps it remain resilient through changing market conditions. Roers Cos. is a vertically integrated business, meaning risk mitigation is built into our structure and strategy. Our integrated model positions us to advance projects even in challenging market conditions.
Fluctuating Economic Markets. Control of construction and diversified financing solutions help protect margins in high-rate environments. Vertical integration gives Roers Cos. greater visibility, direct construction oversight, and greater control throughout a project’s lifecycle. It reduces reliance on middlemen and supports faster, more efficient decision-making and execution. Close coordination among departments allows Roers Cos. to manage risk, control costs, and support lease-up strategies.
Absorption. Strategic suburban locations and strong historical lease-up performance support occupancy reliability. Absorption is one of the biggest considerations Roers Cos. evaluates when assessing new project locations. One key data point used to project absorption is vacancy rate, and Roers Cos. targets areas with vacancy rates of 5% or lower. Quality of life is also a strong indicator of a project’s potential for absorption. Locations need to be desirable to lease up successfully, so Roers Cos. looks for easy access to known demand generators. Projects should be close to highways, transportation, casual dining, and entertainment to be attractive to residents and, in turn, highly absorbable.
Axle Apartments in Fridley, Minnesota is a prime example of Roers Cos.’s absorption strategy at work. Demand for updated, amenity rich, workforce housing was at a high in Fridley. Located in a high visibility area with easy access to highways and public transportation, the project location showed high signs of easy absorption. Axle Apartments saw record lease up velocity and was over 95% pre-leased when doors opened in April 2022.
By focusing on submarkets with strong demand and low vacancy, we can avoid exposure to oversupplied and highly competitive markets, helping support strong absorption at our properties.
Construction Timelines. Integrated oversight and a strong contractor pool support on-time, on-budget delivery. Direct construction oversight and close coordination with established vendors and trade partners allow teams to identify issues early, make decisions efficiently, and keep projects moving toward schedule and budget targets. Roers Cos. vertically integrated structure gives us more control, oversight and flexibility when challenges arise- allowing for early or on time execution time and time again.
The decisions people make about their finances are among the most important choices they face. Being informed and aware of where capital is allocated is one of the best ways to help ensure assets are managed responsibly and given the opportunity to grow. A diversified investment portfolio can help protect assets and support long-term financial goals, which is why many people consider alternative investments such as multifamily real estate as part of their overall investment strategy.
While avoiding risk altogether is impossible, risk can be mitigated through proactive measures and intentional strategies. For potential investors, understanding the risks associated with multifamily real estate is a vital step before choosing to invest.
To learn more about current and upcoming investment opportunities in multifamily real estate contact the investor relations team here.
