Three things you should know before buying a multifamily
With the economy currently in the state that it’s in, not just nationally, but globally, it’s important to make every single penny count. In a time of recessions, cutbacks, redundancies, and property prices tanking in a number of parts of the country, and indeed the world for that matter, it’s now more important than ever to make sound, smart, financially secure investments to protect your assets, and set you and your loved ones up for the future. As far as investments go, rather than risking literally everything in some cases, in the stock market with various stocks and shares, property is shaping up to be just as sound an investment as gold in many cases, particularly multifamily buildings.
Multifamily properties are so beneficial because as the name implies, they house a number of different families. Each of these families means a separate income from each one, allowing landlords and property owners to rake in numerous incomes on a regular basis. If you’re thinking about investing in a multifamily residence however, there are a few things to consider before you do so.
They are purchased solely for investment purposes – If you decide to take on a multifamily residency, you should be doing so for no other reason than to treat it as an investment which is designed to make you money. In simple terms, you won’t take on one of these buildings for you and your family to live in. They are designed to make you money, and if you know what you’re doing, they’ll do just that. Say for example, you purchase a building for $300,000, and brought in a net income of $30,000, then according to the ‘cap rate’, your return on this particular investment would be 10%, with a cap rate of 10.
You will be dealing with tenants – so choose wisely – Multifamily buildings house a number of different families, each member of which will actually be your tenants, as they’re living in a building which you own. Because of this, you will have to deal with tenants as a result. You’ll be responsible for a number of maintenance issues, rent collections, and other issues associated with being a landlord of a property. For this reason, it’s a great idea to screen and vet any potential tenants before you allow them to live in your property. Research their credit history, where they were living previously, whether they have any outstanding warrants, criminal convictions or drug related issues. speak to previous landlords and ask for character references and other information. If they sound like trouble, you should give them a wide berth as problem tenants can end up not only costing you money, but can also make your life, and other tenant’s lives miserable in some cases. On the flip side, if you choose respectable, hardworking, upstanding tenants, then your life will be so, so, so much easier in the long and short term.
You will face competition – As we mentioned, these buildings are designed to make you money, just like a business, and just like with all businesses, you will face competition, this time in the form of other landlords. Because of this, it’s important you ensure your properties, and indeed each individual living location, is kept up to a good standard, in a good state of repair and maintenance. If you let things slip, tenants and potential tenants will soon notice, and will look elsewhere for living accommodation, meaning you’re essentially handing tenants over to your competition. The buildings and living locations don’t need to look like the Ritz, but you should try to make them look presentable, and well maintained. You need to spend money to make money, and if you get your property just right, you’ll make a great deal of cash indeed.