Thinking of buying multi family homes for investment? Then there are a few things you need to consider as a real estate investor.
Even if you have owned and managed single family real estate investment properties in the past, buying multi family homes for investment is on a whole other playing field. Luckily, we have 6 major real estate investing questions that you can answer in order to get ready for buying multi family homes for investment.
#1 Should I Go with Commercial Real Estate Investing or Residential Real Estate Investing?
When it comes to buying multi family homes for investment, you have the option to choose what type of real estate investing you want to take part in. Multi family homes that are 4 housing units or less are considered residential real estate investing. Those that have 5 housing units or more venture into the realm of commercial real estate investing.
This real estate investing choice is important because it affects everything from investment property financing through real estate market analysis to rental property management. If you have a few residential real estate investments under your belt, you may want to expand to commercial real estate investing. This will ultimately help balance your real estate investment portfolio. However, if you are a beginner real estate investor, buying multi family homes for investment that are smaller and considered residential real estate investments might be the better choice for you.
#2 What Kind of Investment Property Financing Will I Use for Buying Multi Family Homes for Investment?
With some real estate investing experience, you likely have a decent credit history and rental property management track record. This makes it easier to qualify for investment property financing with a traditional bank loan.
However, if you are a beginner real estate investor, make sure to work on your credit score a few months before applying for this kind of investment property financing. Without a real estate investing track record to support you, mortgage lenders will scrutinize everything in your credit history.
In either case, when buying multi family homes for investment, be sure you have done your homework. You have to have a great multi family investment property to qualify. The only way to know this is with multi family investment property analysis.
To start looking for and analyzing the best multi family investment properties in your city and neighborhood of choice, click here.
Other Forms of Investment Property Financing
A real estate investor can always consider other types of investment property financing when buying multi family homes for investment. For example, consider forming a real estate investment partnership with someone who has the financial resources to support you. Because a multi family investment property is more lucrative than other types of real estate investment, investment property financing can come in the form of real estate syndication, real estate crowdfunding, etc.
You can even look into alternative, less expensive options. Learn about them here: How to Buy Multi Family Property with No Money.
#3 Have I Chosen a Good Location in the Real Estate Market for Buying Multi Family Homes for Investment?
If you’re considering buying multi family homes for investment, you likely already have a location in mind. Is it your local real estate market or are you opting for out-of-state real estate investing? Either way, you have to be sure that there will be a high demand for a multi family investment property. This tends to be the case in the real estate market of major cities, for example, rather than in suburban areas.
Other factors of the real estate market to look for include:
- A healthy economy with plenty of job opportunities
- A rising population
- The more diversified the economy, the better
- Popular commercial centers
In terms of what the real estate market should offer for the multi family investment property, make sure the location has a good median cap rate, cash on cash return, and potential rental income. How can you get this information when buying multi family homes for investment? Using the right real estate investment tools!
#4 Do I Have the Right Real Estate Investment Tools for Buying Multi Family Homes for Investment?
Buying multi family homes for investment is not as simple as taking a walk in your neighborhood and picking out any multi family investment property for sale. If it were, we’d all be successful real estate investors, wouldn’t we? However, there are certain real estate investment tools that do, in fact, make buying multi family homes for investment simple. These same tools can make any real estate investor a successful real estate investor.
The best real estate investment tool for multi family real estate investing is the investment property calculator. With an investment property calculator, you can find the best performing real estate market (right down to the neighborhood) by looking at the median property price, cash on cash return, cap rate, and even the amount of rental income you can expect.
Once you find a real estate market with the investment property calculator, you can continue using it for buying multi family homes for investment. Find a multi family investment property that promises a great return on investment with the analysis returned from an investment property calculator. Without this real estate investment tool, buying multi family homes for investment could take months, and you might even end up with a dud of an investment property!
Not sure where to find a reliable investment property calculator? Try Mashvisor. To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
Learn more about the return on investment from multi family homes: Understanding Multi-Family Investment Property Returns and Benefits
#5 Will I Take Care of Rental Property Management Myself or Hire Professionals?
When buying multi family homes for investment, you need to decide who will handle the rental property management before you even make the purchase. This is because rental property management is hard work for a real estate investor/landlord, and it isn’t a decision to make lightly.
If you do decide to use professional rental property management, you’ll have to factor it into your budget to ensure it doesn’t take too much of the rental income out of your pocket. Professional rental property management usually costs anywhere from 4-7% of the monthly rental income.
#6 Am I Ready for Buying Multi Family Homes for Investment?
Buying multi family homes for investment can be a great financial choice for any real estate investor. If you have come up with a satisfactory answer to each question in this post, you’ve already begun planning for buying the best multi family investment property in the real estate market. I would say you are ready.
Start looking for a multi family investment property anywhere in the US real estate market right now. Click here to get started.