Proven Tips for Multifamily Property Investors
The advantage of multifamily property, such as duplexes and apartment buildings is that it can pay off debt by using other people’s money.
When buying multifamily property this idea must be kept in mind because the success or failure of the rental property depends on the income it generates to meet debt and other obligations. Your multifamily property will grow or fail based upon this concept.
Why do real estate investors buy multifamily property?
Let’s take a look at why investors buy multifamily property and expect a profitable return on their investment.
The most obvious reason real estate investors buy any income-producing property is because they can become wealthy in the long run. Just by holding onto the property and letting “other peoples money” payoff the debt, even if there is no immediate cash flow, is what drives people into real estate investing.
The risk is limited because multifamily properties serve a basic need; they provide shelters to those who cannot afford buy or who choose not to buy a home.
The downside to buying multifamily property is in management and the day to day dealings with tenants. A resolution to this problem is to hire a professional property management company to run the property and deal directly with tenants issues.
How to Buy Multifamily Property
1) Secure Solid Financing – Establishing sound financing on the property is of utmost importance when buying multifamily property; you will want an investment that doesn’t place excessive burdens on the property or yourself.
Remember this: lenders evaluate rental investment property based on income stream, and typically structure a loan based on the property’s financial strength as well as the buyer’s. So, when you apply for a loan to buy multifamily property, present lenders with clear and concise cash flow reports. The more accurate the reports are the more likely you are to obtain financing with favorable terms.
2) Understand the Local Rental Market – Stay on top of local rental market trends so you know how much potential tenants are willing to pay for one of your rental units. Due diligence will make or break your return on your investment. You will also want to know what the vacancy rates are for the area.
Read the newspaper or drive around the area, making note of all vacant rental properties. If there are few for rent ads and signs, it is probably a good sign there is a shortage of rental units per demand and a great opportunity for you. A shortage of available rental can mean you can raise your rental price and get it from new tenants. On the other hand, many for rent signs and ads signal higher vacancies and possible rent reductions.
3) Economic Conversion – If the multifamily property you want to buy has been left to run down and rent had to be decreased to keep the units filled, consider it an opportunity to upgrade the building and ultimately raise rent. When multifamily rental properties are in a good area of town or in an area that is returning to a former higher quality, remodeling a rundown apartment complex can be a profitable venture.
Before you buy a multifamily property, be sure to get a professional, licensed contractor to give you a quote on remodeling. What looks to be surface issues can later turn out to be more than cosmetic and you will find yourself losing money on your investment.
Hire a professional at Florida Business Brokers to help you find the right multifamily investment property and to help you make better decisions. Don’t risk your funds by trying to do it all yourself, you will lose in the long run. Search our commercial property listings at http://floridacommercialmls.com or call 1-561-234-5678 for more information