Real estate investors love adding multifamily homes to their portfolios because of the many benefits a multi-unit property provides. These properties are easy to finance, easier to manage than multiple single-family homes, and provide a large amount of cash flow. They’re also a great way to build your real estate portfolio very quickly. Say you’re a real estate investor who’s considering getting into the world of multifamily real estate, but you’re hesitant since you may not know much about these properties other than them requiring a little more upkeep. Well fear not, because we’re going to go over a few different things that can help you make the transition to multifamily investing.
Before you start looking at potential homes to add to your portfolio, you should decide what kind of property would suit you best. Multifamily properties come in a variety of sizes and locations, from duplex homes in the suburbs to 100+ units in the city. You definitely don’t want to bite off more than you can chew, so if you’re hesitant you should start small with a property in the 2-6 unit range. This will help you get used to managing a property with multiple units, and it can also be a great opportunity to learn about the multifamily financing process.
If you are completely in the dark about multifamily properties, or maybe you’re new to real estate investing in general, you’ll want to do a bit of research on your own so that you don’t get stuck with a bad deal. Luckily, in the age of information there is a wealth of knowledge just a few clicks away. You should spend some time learning the ins-and-outs of multifamily properties, because while they definitely do require more attention than your standard single-family home, they also have a few unique differences. For example, there can be significant tax savings on your property if you perform a cost-segregation study. Your town or city may also have their own regulations on these properties, so you’ll want to make sure you’re up to speed on those as well.
Another thing you will want to decide is how you’re going to deal with the day-to-day management of the property. Specifically, you’ll want to decide whether you will manage the property yourself, or hire a property management company to take care of it for you. While you might be able to handle regular maintenance and upkeep on a duplex by yourself, it can be a different story with a 10+ unit apartment building. If you don’t have experience managing that many tenanted units, you may be better off going with a smaller multifamily home or working with a property management company. Regardless, you should weigh the options, consider the costs, and have this decided before you purchase a property.
While you might have to learn some new things before jumping into multifamily property, you also shouldn’t forget the fundamentals of real estate investing. Location is key, and the neighborhood the home is in can have a significant impact on rental pricing. Also, you will definitely want to hire a property inspector to make sure the building is in good shape. Repairs can take a large chunk out of your profits, and these repairs can be even more costly when they affect large buildings with multiple units. Finally, be sure to set aside some funds to cover soft costs like legal and closing fees.
RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Connect with us today to discuss financing options for your next multifamily investment.