In this day and age, more and more people are interested in investing in residential real estate. Residential real estate could be divided into single-family properties and multi-family properties. We’re all aware of single-family units that are bought and occupied by one tenant and his/her family. In multi-family properties, there are usually four to five or more tenants, depending on the type of property you have. Rental properties these days are getting more and more popular because it’s easier to get the loans, and in the long-run, you get a steady source of income. For instance, if you have a single-family rental, once the family moves out, there won’t be any cash influx. But, with a multi-family rental, if an occupant and his family leaves, there are other occupants on the property a.k.a. your wallet won’t be empty.
Before You Buy
Now, before you even consider investing in a multi-family rental property, there are a lot of things you need to research on. And as with any real estate, the most important characteristic of a property is its LOCATION. Write it on post-its and make sure they’re on every surface so that wherever you go, you remember that “location” is the secret to having the best real estate in town. You need to check that the property you want to invest in has schools nearby, public transportation systems, parks, restaurants, shopping centers, thriving businesses, hospitals, should have a good family-friendly neighborhood, no run-down buildings that can deter tenants from living in the area, and other establishments that can bring tenants to your property. Check if the property you’re interested in is in need of repair and maintenance because, in the end, it could mean additional costs to you. And do look into a property that’s more closer to where you’re currently living so that it’s easier for you to manage, especially if you have commute back and forth.
After deciding on a real estate property, it’s time for you to look into your financial reserves and see if you have the finances to invest in a multi-family unit. If not, that’s alright, you could get loans from a lender. The thing with multi-family units is, banks easily approve for its loans than they do for single-family units and this is because multi-family properties generate a consistent cash flow every month.
Many people go blindly into real estate and make the wrong decisions that could bring on a loss of thousands of dollars. You need to consult with a real estate agent before making any decisions. A realtor knows all the ups and downs of the market and has in-depth knowledge of the property you’d like to invest in. Always approach a qualified professional who’s had his fair share of experience in the multi-family real estate business. They can guide you in making the right decisions and refrain you from making the wrong choices.
If you’re new to the business, you could always start small with a duplex, triplex, or quadruplex. It’s easier to look after if you plan on keeping tenants and it’s also easier to renovate and maintain, especially when you want to sell it.
Suppose you’ve got the property of your dreams, it’s now your job to look after it. You need to keep track of tenants and their monthly payments, security deposits, leases, landlord insurance, and all those other pesky details. Some prefer keeping property managers and some prefer living in one of the units so that they’re at the heart of their investment and can easily keep track of all these details. Make sure you regularly maintain your property so that when it comes time to sell, your property’s value will have appreciated. If you’re not in the mood to sell, remember, your property still needs to be renovated and maintained. A renovated property will attract more tenants, increasing your occupancy rate and decreasing the vacancy rate. Renovation obviously takes up finances, so the best solution to this dilemma is setting aside some of your earnings from the building in a proper budget so that your renovations expenses don’t put a dent in your earnings.
There are a few investors in the real estate business who’d rather buy a rundown unit that is in its prime location and has potential, for pennies and then sells it for a mint after repairing and renovation. It’s called fix and flip and is also another great business strategy. Many think that it’s easy to fix and flip homes but there’s a lot that goes into the process, so much so that you could either gain a profit or a loss. You need to do your research on the property, on the contractors in the business and you need to give it your time and energy so that at the end of the day that blooming profit doesn’t turn into a loss.
A lot of American families prefer renting out multi-family units that are in a prime location, rather than buying a single-family property and having to go through the hassle of down-payments, mortgage interest payments, property taxes and so on. If you have a multi-family property that is repaired and renovated, expect your occupancy rate to increase. Again, you need to do your research on the property, understand the rental market in the area and check what the occupancy and vacancy rates are. Check online, visit the community, talk to people and other tenants or check the local newspaper. Remember, when you’re thinking of investing in a rental property, you need to be aware of the market value of your property, the income, and the expenses. At the end of the day, your goal is to get a much higher return as compared to what you’ve actually invested in the property. Investing in a multi-family property has its risks and is an extremely time-consuming process but it’s also rewarding. You need to do your research on the location, the property, the situation of the real estate market and also invest in a qualified realtor who could help you in making the right choice.