Investing In Multifamily Real Estate? Here’s What You Need to Know

Multifamily real estate can be a lucrative investment when you know what you’re doing. Multifamily properties typically consist of 2 to 12 home living spaces for residents, housed within duplexes, condos, or apartments. The pandemic has made the multifamily real estate market much more appealing than years prior as well.

In 2020 when lockdown measures were put into effect, there was a great migration in America where city residents moved to the suburbs where they were finding cheaper rent for larger living quarters. This influx in tenants left the rental market in big cities scrambling, nearly crashing; and while it spelled trouble for investors, it has left an abundant market for new buyers.

Investing in real estate within the multifamily category can be an adjustment for those who have never done so, even if you have experience with single-owner home real estate. More occupants mean more wants and needs to be met, renovation expenses can be doubled, tripled, etc. With that in mind, here are five tips that will help you if you’re thinking about investing in a multifamily real estate endeavor.

Research Property Management Companies

According to RPM Evolve, an East Valley property management company, working with a property management company is a great call for both novice and experienced multi-family homeowners. Working with tenants can be difficult and having a direct line they can reach out to that isn’t your cell phone can help alleviate the stress of the job.

Property management companies handle nearly everything when it comes to tenant interaction. They know how to sell a property to potential tenants, collect rent, monitor your noise levels and complaints, and even hand out any dreaded eviction notices. Before you choose a property management company, do your research. Look for companies with positive online reviews and ratings, ask them for examples of their past work, and make sure their service prices fall within your budget.

Pick A Specific Market

When looking for a multifamily home to invest in, focus on what rental market you want to be within. Identify the most lucrative areas in your target location; for example, if you’re located in Boston, known to be a college city, you might want to look for multifamily rental units that would appeal to students. Market research can be as easy as googling the “best” multifamily real estate markets or speaking with a market expert to get their insight.

Look Into The Location

Similar to the importance of your market, tour location can make or break your multifamily rental investment. Before investing in a multifamily rental, research locations that you would be interested in purchasing. Or, if you find a multifamily rental you love, look into the surrounding area to see if it also aligns with your target location.

The factors of a good location are the proximity to the community, the neighborhood the home is in, the development of the area, the amenities offered, and the appearance. A good location also typically has good public transportation options, high-ranking schools, and a high level of community involvement.

Consider Living In One Of The Units

Living in one of the units within the multi-family home you purchase is beneficial for several reasons. First, you’ll have a first-hand account of living on the property; you’ll know how thin the walls are, when pipes burst, when the water pressure changes, etc. This will give you better insight into what in your multifamily real estate investment needs to be updated or better installed.

Another reason is budgeting concerns. Before you invest in multifamily real estate, look into how much money you could be saving or putting into your new project if you lived within it. It may even lead you to purchase another multifamily unit sooner because you’ll be lowering your debt to income ratio, which is more attractive to banks.

Budget For Everything

A budget is pivotal when investing in multifamily real estate. Before anything, work with your accountant or bank to figure out just how much you can spend on a multifamily real estate investment. Once you’ve purchased a piece of multifamily real estate that meets that budget, begin another one for your renovations.

Emergency money should be set aside as well, as you never know if a tenant will miss rent or be unable to pay you entirely. You should keep your budget for different projects throughout your investment separate, but be sure to have an overall number you know you can’t go over.

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