4 Things to Consider When Investing in Multifamily Properties.
Making the decision to enter the property rental field means you will have to consider several factors before investing in a specific location, particularly if you are renting out a multifamily property. Even if you are investing in a small multifamily building, there are some factors to consider that are usually not present in a single-family property investment. Before you make a final decision on a particular property, consider the following factors to make an educated decision.
Location of the Property
Perhaps the most important factor to look out for when renting a multiunit property is the location. While renting out a single-unit will place your concern over what one family or individual thinks of the location, you must ensure that multiple tenants enjoy the location where the property is. Research the potential neighbourhood before the property itself, and look for crime rates, amenities, school ratings, public transportation, and more. These factors can influence your decision on where you want to invest and where the tenants would like to stay.
Number of Units
Another factor to consider when choosing a multifamily rental property is just how many units you will have to assume responsibility for. On one hand, the more units you have, the more the cash flow increases and the faster you can grow your real estate portfolio. One the other hand, this also means you have more units to provide maintenance for and more tenants to look out for. If you are a beginner investor try to stick between two and four units, as they provide more profit with lesser risk.
Depending on how many units and tenants you take in, as well as specific features each complex has, your costs will vary. Consider the maintenance costs for each unit and how they can add up. Also, the units will not stay occupied forever, and sooner or later, someone will move out, which will decrease your income. Make sure you have a back-up plan in case of an unexpected vacancy, particularly for an extended tenant turnover period. Finally, consider the financing of this property. Lenders for multifamily rentals will often look at your credit score, down payment, and debt-to-income ratio, so have these matters in order.
The Property Seller
Before closing a deal, you should investigate the seller of the rental property. The overall cost of the property will greatly depend on who is selling you the building, as well as their motivation. A property owned by a bank is handled different than a property owned by an individual, for example. The former may offer you additional savings that the latter cannot, for example. In addition, ensure that you are purchasing this property from a reputable owner or institution.
No matter the size of the multifamily rental property, it will have several aspects and factors to manage and oversee, so in comparison to a single-unit property, it might feel like less of hobby and more a full-fledged business. Home365 will provide you with the property management service you will need to run such business efficiently. Visit our website today and learn more about our services.