A Multifamily property, usually a rental property is the type of property that has more than one family unit. It could consist of only two units or even more than one hundred apartments; as long as more than one family can live on the property, it is referred to as a multifamily property. Now it is very possible to own a multifamily property and make money from it. the question then is “how?”
Through purchasing a multipurpose property, real estate investors can support whatever debt they have on the home from the income generated from the property. This, in the real estate world is known as “using other people’s money”. It is a very important strategy if you want to buy multifamily properties and make profits. However, it is important that you note that how successful your investment is, is the determinant of whether you will be able to keep the property or not as it is from profits realized that you will be able to service the debts and fulfill other obligations required so you can keep the property.
In this article, we will be looking at three different things that you should put in place when buying multipurpose property for profit purposes.
Get solid financial support
To purchase an investment property, it is important that you secure a solid financial backing and support. Make sure the loan is not one that places a lot of burden on you, or the property. Also, multifamily real estate us valued based on how much income the property is expected to generate and the financial strength of the investor. Do not forget how important to know the impact of using other people’s money has on the investment.
In the process of applying for your multifamily property loan, provide lenders with clear and accurate cash flow reports so as to put you in a favorable spot as all the figures will be fair and accurate.
Carry out a rental market survey
What you stand to make from a multifamily property investment is very much dependent on how much tenants are willing to pay which is usually decided by how much other tenants pay on the average in a local rental market. As an investor, it is important that you understand the market rates and trends so as to know what your potentials for profit are.
You can easily identify with real market trends by reading local newspapers or even driving through rental properties. If there are only a few ads for rent, it probably means there are not much rental properties and this could be an opportunity for you. However, if there are plenty rental ads and signs, this could bring about a drop in the cost of renting out a property and as a result, could spell doom for your investment.
The best time to own a multifamily property is when the rates of vacancies decrease and there are more tenants than the available multifamily units to let out. This time is when a lot of property owners increase their rents and are highly selective about the type of tenants that they want. Basically, it is very important that you carry out a rental market survey in the community where your multifamily property is located so you can know how profitable your investment will be and to have an idea of what the rent rates are.
Consider remodeling and its benefits
It is quite normal for property to depreciate and in cases where former property owners did not keep up with renovations and the rents have been reduced, you could carry out renovations on such property. You should only do this if it is in a highbrow area and there is a high potential that the property could regain its lost glory through that renovation. Understand what it would cost to remodel a property and know how exactly it will affect your income stream.
The best thing to do is to get a contractor to give you a bid so as to avoid a situation where you will throw money down the drain. Essentially, upgrading a building is an opportunity to raise rents and make more money off the property. Just make sure you exactly what you are doing.