When getting started with multifamily real estate investing, you will want to learn the basics of the real estate investing trade. Compared to single-family properties, multifamily real estate makes for a unique investing experience. Here is how to evaluate properties when it comes to multifamily for sale.
The location of the property is of the utmost importance when it comes to multifamily properties. If you are to get the most from your investment, you should consider multifamily homes for sale in high-yield, high-growth areas that are not only in high demand but also feature well-maintained neighborhoods.
Once you have established that the property is in the right location, you should evaluate the property as a whole. This means looking at the total number of units on the property as well as the number of rooms in each unit. When beginners are evaluating multifamily houses for sale, it is advisable that they focus on the duplex, triplex, and four-plex. This is because these types of properties are generally more affordable and present minimal risk.
Every investor will want to get some form of return on their investment. This is why you should take the time to calculate the potential income the property can accrue. While there are several helpful sources that you can rely on to verify rental prices and income, it is important to do due diligence. This will require that you take all the important factors into consideration – density, demand, rent rates, job growth, and more.
Another factor you will have to think about is the costs. When financing multifamily properties, every situation is different. While some investors will choose to live in one unit while renting out the other(s), other people will acquire the properties purely for cash flowing them. If you are contemplating financing options, some of the factors that will determine whether you qualify include your credit score, the down payment you make, and your debt-to-income ratio.
It would also be necessary to do some background check on the seller. Make sure you know who is selling the property, why they are selling it, what occupancy is sitting at, if there are any liens on the property, and absolutely get a professional inspection done. With multifamily homes, you will want to know who you are dealing with and their motivation for selling the property. All of those factors will help you determine if there is potential for cost savings, a need for improvements throughout the property, and the potential for increasing the rent over time as well.