If you’re someone who has a love for real estate and has the ability to learn and ensure a profitable investment, then this real estate investment sector is the right one for you! Multi family real estate investing is the choice many expert real estate investors are making. It’s quite different from single-family real estate investing. However, it’s a harder investment strategy to implement. Real estate investors are expected to step up their game when it comes to multi family real estate investing.
Two points to look at with multi family real estate investing
Net operating income
The net operating income is used to describe the amount of money that any investment property can generate. This is usually a constant. Moreover, it includes the rental income generated by a property after subtracting expenses.
Cap Rate
The capitalization rate is calculated by dividing the net operating income by the purchase price of the property. The capitalization rate is a must-know figure when it comes to buying investment properties. Don’t hesitate to ask your real estate agent about the cap rate of any area you’re interested in.
What to do to ensure a profitable multi family real estate investment
Here are the best actions any real estate investor can take to ensure the profitability of his/her investment decision:
Hire an investment property specialized real estate agent
As we all know, there are different types of real estate agents. Therefore, you must pick a real estate agent specialized in real estate investments. As a matter of fact, hiring an investment property real estate agent can help save you both time and money when looking for the right property. You must face the fact that you’re not buying a home for yourself or a single-family rental property, and that comes at an extra cost. If you’re not sure where to start looking for a real estate agent, read here: How to Locate the Best Real Estate Agents Near Me for Buying an Investment Property.
Surround yourself with the right real estate investment network
In brief, having a real estate investment network is a must and will definitely make your life a lot easier when it comes to investing. In any case, you will need a real estate broker/agent, lender, and an attorney- preferably specialized in real estate transactions. These professionals can enrich any real estate investment portfolio and are a must have to make a sophisticated investment decision.
Consider living in the property
In any event, it would be ideal to save a bundle of cash on rent and just move into a unit within your rental property. Additionally, you can qualify for owner-occupant financing and a lower down payment. Furthermore, a real estate investor can qualify for another loan soon, mainly because the income to debt ratio would be lower.
Go through the paperwork
Yes, that dreadful must-do task. You must go through the paperwork of the investment property’s accounting history. This is a must when it comes to multi family real estate investing. Specifically, request income statements, expenses and maintenance reports for past years. Accordingly, you can match your expectations of the multi family property to real results of the current owner.
Additionally, you must have a look at the rental agreements, rental payments receipts, and even deposit payments. Note that you must have any deposits transferred to you. This is a must do and will save you a headache along the way.
Have a rainy-day fund
While we all hope that we won’t have a rainy day when it comes to our investment properties, it’s an inevitable truth that we can’t all avoid. In any case, you might end up having vacant units in your rental property. This all can be counted as extra costs.
What most successful real estate investors are opting for, is skimming somewhere between 5-10 % out of the net operating income of the property and saving it for a rainy day. Always be prepared for the worst; you will be able to hold your ground in the face of any real estate market declines, or unexpected maintenance.
Look for a growing market
Firstly, a growing market is not strictly defined by saturated real estate markets in major cities. Yes, you could invest in Los Angeles, San Francisco, or New York City if you have the resources, but that’s not the case for most beginners. A real estate growing market can be a location that’s rising in employment opportunities and population. Altogether, these factors make for the best atmosphere for a growing real estate market fit for multi family real estate investing. Read this blog post to spot the emerging real estate markets: What Are the Emerging Real Estate Markets for Investment in 2018?
Use an investment property calculator
Nowadays, an investment property analysis is easily performed through an investment property calculator with just a few simple clicks. Additionally, knowing the numbers in real estate investing in general and specifically in multi family real estate investing is always a must to ensure a successful real estate deal. Moreover, the real estate investor can find out all the numbers that he/she will need before diving all the way into any property. These numbers include cash on cash return, capitalization rate, return on investment and a few others. Whether you’re going for Airbnb rentals or traditional rentals, you can utilize Mashvisor’s investment property calculator to find any numbers you need to verify the profitability of an investment property. Click here to make use of the 14-day free trial with Mashvisor’s investment property calculator.
Educate yourself on multi family real estate investing
Even if you’re an expert real estate investor with single-family real estate investing, diving into multi family real estate investing comes with a different depth and complications. Moreover, if you wish to go through with multi family real estate investing, you must read and get to know what needs to be done. If you’re not sure where to begin, read this blog post: Learn from the Best Real Estate Investing Books.
To sum up, if you’re considering multi family real estate investing, you mustn’t be afraid of making a terrible investment. Additionally, surround yourself with the right real estate investment network. This can help familiarize you with that specific field of real estate investing. Moreover, don’t hesitate to talk to current occupants or tenants to know their opinions and needs. Also, a real estate investor must check the landlord-tenant laws in the area in consideration to make sure you are protected in any scenario.
If you have any more insights on the topic, don’t hesitate to share them with us in the comments section.
