Pause a while before venturing into multifamily investing

by Daniel Morris Content Writer To quote Brian Davis, a real estate investor and co- founder at SparkRental.com, “You're ready to buy a multifamily property when you're excited about the idea.” According to him,  "I've known people to buy a multifamily property as their first investment property, and I've known investors to buy dozens, even hundreds, of single-family properties because that's what they liked." But before you actually start venturing into multifamily investing which is a highly lucrative investment option to try out, you need to keep the following salient features in mind:

Live in one of the apartments for a considerable period of time: suppose you are buying a building consisting of four apartment units or more, try living in one of them for a considerable period of time. This would enable you to qualify for owner- occupied financing option where you would be allowed to buy the apartment at a lower down payment. According to Fergusson, “It may also allow investors to purchase another investment sooner because their debt-to-income ratio would be lower to show banks they are better qualified.”

Approach the correct professional help:  buying a property and if it is a multifamily investing case, then you should definitely take the help of the correct professionals who would be of help to you throughout the entire period. In the words of Lee Kiser, the managing broker of Kiser Group based in Chicago, "At a minimum, your experienced team should include a broker, attorney, and lender.” These professional facilitators would help you interpret the local customs and would also guide you to prioritise your list of the items and aspects that should be reviewed. Their service would also help you to monitor the cash flow into the building.

Always request for detailed and exhaustive paperwork: According to Kiser, one should always ask for every kind of paper that might be related with the property. This is to ensure that the historical records of the property meet your expectations. You should also speak to the current tenants directly so that you have a fair and first- hand idea about the condition of the building. Apart from this, you should also verify the proof of the rental agreement and every legal paper without fail.

Have a proper estimate of the property: One must keep in mind that a multifamily property is never valued by the price per square foot, but rather the value depends on its income and return on investment generated. Examine the income and expenses of the building and see how much is left over, which is called net operating income. This number is divided by the typical rate of return for a market area (called a capitalization rate) to determine fair market value.

The above data should guide you to invest appropriately in case of multi family real estate.

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Created on Apr 27th 2018 07:32. Viewed 373 times.

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