If you´re planning on using your money to increase your wealth, then you should look into real estate investing, but if you´re looking for a steady increase in your incomes, multifamily investing is what you´re looking for. The first thing you need to know is that multifamily investing means becoming the owner of several housing units, which is also called a complex, instead of buying just a single unit. While a Single Family Investor buys an apartment, the Multifamily Investor buys the whole building.
What do you know about multifamily investing?
There are several types of properties in multifamily investing. We have small properties, which go from two to four units, and large properties, which go from five forwards. Later on you´ll see the difference between them.
How can I value the multifamily properties?
The property´s value depends from its type. On one hand, if we´re talking about a small multifamily property, we´ll have to look at the comps surrounding the place, and also, if you want to get a loan, you need to take a look at the loan-to-value ratio (LTV), which takes all the near properties into consideration.
On the other hand, we have the capitalization rate- known as cap rate– to measure your earning percentage according to the yearly rent your tenants are going to pay you, the vacancy rate, the operating expenses you need to pay for and the actual costs of the property. With all these taken into consideration, you can see if the purchase is really worth paying.
Where do I start?
You need to be aware of the area´s demographic density to make your investment. If the area has an increasing employment rate, we are talking about a high growth region. There´s going to a lot of people interested in acquiring a house near to their workplace to reduce its transportation payments. In addition, we have the high yield regions, which refer to an area where you pay a lower price for the property and therefore get a better income. That´s why you need to gather all the useful information you can find about your properties´ surroundings.
Can I deal with all that´s behind Multifamily Investing?
All the earnings that Multifamily Investing has do not come free; there´s a lot of harsh situations that you will need to handle, especially in seeing the big picture but also looking out for each tenant, it is known that the more people you have, the more conflicts will appear. Also, you´ll have to face the competition, which is more than in Single House Investing. It seems that in the world of Multifamily Investing you need to take all the Intel into consideration and make the right calls to get the return you expect. The situations are harder but the results are much better.