Multifamily Investment Properties

Multifamily Investment Properties

Purchasing property for the purposes of an investment has advantages. A wise investment will provide good returns and possibly years of enjoyment in the business. Buying multifamily investment properties however may have disadvantages as well.

Property that has more than one family unit for residents is considered multifamily. A duplex or two family unit is the smallest type while the largest complex might have hundreds of apartment units.

Some of the advantages of owning multifamily investment properties are following.
  • Multifamily units provide for the basic needs of people. 
  • People always need a place to rent, in any community for many reasons. 
  • Another advantage is the investor becomes wealthy over the long run. Simply by renting the units in several multifamily properties, the investor pays off his mortgage using the money from the rent checks.  A shortage of available dwellings allows owners to be selective in their tenant choices raising rents as needed and reducing vacancies.

There are some disadvantages of owning this type of property as well.
  • A shortage of tenants due to a changing market sends owners problems. They can no longer be choosy about their choice of tenants, vacancies are higher and more frequent, and leasing rates are reduced. 
  • One cause of a low leasing market is rising of home ownership in a good market. 
  • Another problem is the management of an apartment complex can be demanding due to tenant needs.

Financing multifamily investment properties can be based on the leasing income. These income producing properties support the debt incurred. The lender considers the property first and the investor second in the multifamily purchase. In a single family or vacant property the financing is based on the investors financial strength.

In other words the lender evaluates the property according to its income from the renters. Any investor should present an accurate income and expense report and projections that show an increase in the future. Software available for investors helps them create the cash flow projections quickly.

There are many ways to find a deal when investing in property. It is best to use several different methods for leads.

When searching for multifamily investment properties, think like a realtor. Realtors often send out postcards to certain areas in hopes of someone wanting to sell their home. The investor can take the same approach. Send out a mailing of postcards with a rented mailing list.

Another option is to place inexpensive ads in the newspaper. Instead of a simple ad saying you buy houses, think like the homeowner wanting to sell. Do they need money? Probably. Place your ad in the money to lend category.

Buying foreclosures, divorce properties or probate properties is another option for investors. These properties are public knowledge. Send them postcards offering to buy. Contact them in person or the phone. A phone call is more personal than a letter. The owner may hang up on you or abuse you verbally. This is normal. They are going through a hard time. If you do get the homeowner on the phone, set up an appointment to talk to them face to face. Let them know you are an investor and are prepared to help them quickly.

Consider the realty market when you try to buy multifamily investment properties . What is the market doing? How is the property market in the area you are buying? The market helps determine your return on the investment. A lower market will offer less return while a higher market you will get back more return on the money invested. This is an important fact to consider when choosing the right property for your budget.

The investor should consider the property value of the investment properties they are considering and the neighborhood they are located. A multifamily apartment unit located in the up and coming new neighborhood will give a better chance of getting a higher return on the investment. An apartment dwelling located in a declining neighborhood, on the other hand, has a slim chance of increasing anytime soon. The investor is more likely to get lower rents, more vacancies and less return on their investment.

It is rewarding to buy multifamily investment properties and see your returns increase while you are helping people in need.

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