With the real estate market booming across the country, interest in investing in real estate has soared. Whether for first-time investors or seasoned real estate moguls, multi-unit properties can bring a positive return on investments. However, if you are looking to begin a real estate investment portfolio or even an experienced investor, it is essential to understand multi-family units differ from single-family properties. Here are some tips to help you begin your endeavor into purchasing investment properties including multi-family real estate.
What Is Considered Multi-Family Real Estate?
For a property to qualify as multi-family real estate, it has to contain more than one separate unit of housing. Multi-family properties can be contained within one building or a complex of buildings and can be small or large in scale.
Multi-unit properties may seem expensive to purchase, but they actually can be much easier to finance than single-family homes. This is due in part to the property’s potential to generate multi streams of positive cash flow which is considered a positive attribute to loan officers and banks. Investors who purchase a multi-unit property have opportunities for positive financial growth if managed correctly.
Conduct A Preliminary Analysis
Before you dive headfirst into purchasing a multi-unit real estate property, you’ll want to conduct a preliminary analysis of the deal. This analysis will help you determine reasonably quickly if you’re going to pursue the property or look for another sale. Gather information such as listing price, number of units, current and potential rental prices of each unit, and the location of the property. This information will allow you to develop a rough estimate of your expenses and determine the estimated cash flow potential.
Deeper Financial Analysis
If you decide to pursue the deal on the multi-unit property, you will need to conduct a deeper financial analysis. This is the time to complete a property viewing and walk-through to get a detailed understanding of property specifications and repair estimates. This is a critical step regardless of your investment experience as due diligence before signing on the bottom line decreases costly surprises and mistakes.
Use what you have learned in your property assessment to estimate total monthly income, annual new operating income, expenses, capitalization rate, and monthly cash flow.
Secure Funding For Purchase Of Property
With the data you now have in hand from your analysis of the property you intend to purchase, secure the appropriate funding for your project. Hard money lenders are preferred funding sources for investors purchasing multi-unit properties as time is of the essence when making a deal. Which funding source is suitable for your investment will be based on your specific needs and the parameters of your contract.