Are you considering expanding your current commercial investments to include multi-family properties? These types of properties have quite a few benefits, including having additional revenue streams and the advantage of being able to manage several units all under one roof. This can make property management much easier in the majority of cases. While there are benefits from investing in these properties, you need to make sure you are investing wisely. The following expert multi-family investment strategies and tips can help to keep you on the right track as an investor.
Investigate the Location
Where the property is located is undoubtedly going to be one of the most important factors when it comes to your investing strategies. You will want to make sure that you choose a property that is in a location that will have a steady influx of potential renters. This will reduce the risk of having a property that has perpetual vacancies. You will want to know more about what the area has to offer in terms of employment, safety, quality of schools, and similar aspects. When you are looking at the location, pretend as if you or a family member would be living there. Would you be satisfied with the location? Would you feel comfortable and safe?
If there are any issues with the location, this means that there will likely be fewer people who want to live there. In turn, this means that you will have more trouble finding tenants, and you might even have to keep the rent very low to get people to live there. A bad location makes for a terrible investment.
Know the Condition of the Property
When choosing a multi-family property, you want to be able to get tenants into the units as soon as possible. If there are already tenants, you want to keep them in the units and happy. This means that you do not want to get a property that will end up needing to have a lot of work done to it. Finding a property that requires rehabbing might mean that you have a property that is cheaper to buy, but it also means that you have a property that will need a lot of work done. This work is going to take time, and the repairs themselves will cost money to fix. While the building or units are being repaired, no one will be able to live there.
This means that you will not be making money on the property for some time. The place needs to be rehabbed, and then you still need to bring in tenants. It could be months before your property starts making money.
Get Detailed Paperwork and Data
When you are talking with the current owner, you will need to make sure they provide you with all of the data and paperwork that you need. Look at how much they are making from the property and how much they are spending to keep the property in shape and to pay for the property. How much is extra money? Do the numbers look legitimate, or is the seller exaggerating a bit? Run the numbers and have a professional take a look at them if you have any questions.
Check Comp Properties
You should also make sure that you take the time to check some of the comparable properties in the area, as this can help to give you a more accurate idea of how much you will be able to charge for rent. See what other buildings are selling for, see how much they are renting units for, and learn more about their vacancies. This can give you a much better understanding of what you can conceivably make from the property, and it can help you to learn whether the seller might have been exaggerating their claims.
Value Conservatively
One of the mistakes that many investors make is believing that their property will be able to earn them the highest amount of money that they have estimated. They do not take into account the perils that reality can bring about. Instead of valuing toward the high end, you will find that valuing more conservatively will help you to have a much more realistic picture of what you should expect.
Keep Cash Reserves
It is also vital that investors have cash reserves available for emergencies and vacancies. While you might want to imagine that everything will go perfectly and according to plan, having some cash reserves available when things do go bad will help to provide you with some peace of mind. If you have a vacancy for a couple of months or an emergency that you have to handle, you will be much happier knowing you have the cash reserved for those issues. Once you use that cash, you will want to make sure that you replace it right away.
Do Not Let Multi-Family Properties Scare You Away
When it comes to these types of properties, the costs will be higher, and for many, that means that the risks will be higher. This is enough to scare many potential buyers away from investing in the property. However, the benefits will outweigh any drawbacks, as long as you keep the above multi-family investing strategies in mind and invest wisely.
Get Help from Professionals
There are many things that you need to consider when it comes to buying the right real estate and investing wisely. Instead of trying to navigate the waters on your own, you will find that it tends to be a much better idea to have the professionals help you along the way. Find those who can help you in various areas, whether it is valuing properties or locations to ensure that the property is in good working order and is ready to accept tenants. Help from professionals can help to make success somewhat easier to reach.
Donald La is a professional commercial real estate broker with a focus in the Los Angeles and San Gabriel Valley areas. Contact Donald today to increase your capital the right way.
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