Investing in Multi-Family Real Estate: The Complete Guide

Multi-family real estate investments are lucrative to an investor who wants to diversify their real estate portfolio without adding an enormous amount of risk. If you’re wondering how to get started investing in multi-family properties, look no further. Here’s the complete guide to investing in multi-family real estate.

What Are Multi-Family Real Estate Investments?

Any property with multiple housing units is a multi-family property. Some types of multi-family properties include:

Duplex – a multi-family home that has two units in the same building

Condominiums – also known as a condo, condominiums are individually owned residential units in a complex or building of like units.

Apartments – a property with five or more tenants that share the apartment’s resources.

Reasons to Invest in Multi-Family Real Estate

More Income, More Tenants

Having more tenants means having more income which is why so many investors look to multi-family properties in the first place. With multiple streams of income, your investment has less risk than a property that depends on one to generate cash flow. You’ll always have reliable monthly cash flow when owning a multi-family property even if there’s vacancy in one unit you'll still have income from other units.

Stability

In the event of an economic downturn, having multiple streams of income from a multi-family rental property may help you mitigate risk in the market. During economic downturns, it’s common for banks to tighten lending requirements, making many customers turn to renting a unit instead. Multi-family investment properties are seen as low risk investments to lenders due to their ability to generate consistent income, giving you a higher chance to be approved for funding even during times of uncertainty. Investing in multi-family real estate gives you stability during economic downturns, helping you to better navigate a volatile market.

How to Find a Multi-Family Property

Do Your Research and Find Leads

Let’s face it, sometimes, the best deals take some time to find. If you’re looking to find the perfect multi-family rental property, be sure to do your research and check all available resources to scout out a property that best fits your strategy. Furthermore, when you are familiar with the local market environment, you’ll be able to pinpoint the value, location, and cost of a house you desire. You can find potential leads by going online or scouting local real estate markets. Searching online for a property gives you more geographical leverage, meaning you won’t miss out on a good opportunity no matter how far it may be.

Work with a Realtor

For investors with a busy schedule, you may not have the time to look for multi-family properties. Finding a decent deal on a property may take longer than you expect due to intense competition. Once you’ve found a property, you have to negotiate the price, handle the paperwork, and other tasks that a broker or agent could easily perform. Hiring a real estate agent or a broker can bring enormous advantages as they can easily find properties for you that fit your budget and personal strategy. While a broker or agent takes the time to find your ideal property, you’ll find that you have more time to reinvest in new projects.

Network

Don’t underestimate your network; making use of industry connections might help you locate multi-family real estate offers that you would not otherwise have known about. If you want to be among the first to find out about new multi-family properties on the market, it’s best to network with developers, brokers, and other investors. Establishing a well-versed network of connections is a certain way to find hot deals in the real estate market, many times before they are even listed to other investors.

Next Step: Funding

Hard Money Loans

In a competitive market, many real estate investors opt to use hard money loans since they are a short-term, flexible option for funding. Because hard money loans rely on collateral rather than the financial position of the applicant, the funding time frame is shorter as they federal regulations. Hard money loans can get approved in as little as a few days, making them preferred in a seller’s market.

Conventional Loans

Conventional mortgage loans are those that come in the form of mortgages and are provided by banks or other institutional lenders. Although this common form of lending is not backed by the government, comply with federal regulations, meaning they have less flexibility than hard money loans. Conventional loans are most commonly used by homeowners who have the intention of owning a property for the long-term.

Private Loans

Private lenders are either people or businesses who lend money using their own resources. These loans are not subject to the same restrictions as hard money loans or conventional loans since they are independent lenders. By dealing directly with the lender, borrowers eliminate the middleman. Depending on your situation, a private lender can bring the benefits of fast funding and negotiable terms, but they tend to hold higher interest rates since private lender can dictate the interest rate at their own discretion.

RCN Capital

RCN Capital offers short-term and long-term financing options for real estate investors. Whether you are looking to fix & flip properties or hold properties for rental income, RCN has flexible options that are suited to your needs.Connect with us todayto discuss your next real estate investment.