Choose the Right Multi-Family Property for Your Portfolio
Perhaps the first thing to know about multi-family rental properties is that there are two main groups. Multi-family buildings with four units or less are usually thought of as residential properties, while a property with more than four units is generally considered a commercial property.
How you look for, evaluate, and set the price of the multi-family property you want to buy will depend on how big it is. For instance, multi-family properties with four or fewer units are usually supported with residential mortgages, a process that is similar to buying single-family properties.
Conversely, commercial property is purchased with commercial debt and priced based on a value formula, not on similar properties. Buying a commercial property is hard for people who have never done it before, which is why most rental property owners start out by buying smaller multi-family properties.
More Units, More Complexity
Even if you purchase a multi-family property with four or fewer units, you will need more preparation than when buying single-family rentals. For instance, location is always a key aspect of any profitable rental.
Location is very important for multi-family properties, as being close to public transit and essential services plays a key role in their success. A detailed assessment of the area’s cost of living, crime rate, and average income levels is critical for making informed decisions.
While looking up numbers online can be effective, they don’t always tell the entire story. This is particularly applicable in areas that have experienced recent changes, whether they were good or bad. In addition to what you’ve already learned, drive the neighborhood and stop by the local police department to get a more accurate perspective on the area.
Get Your Finances in Order Before You Scale
Before you start looking for a house, you need to research lenders and get your finances in order. Depending on the type of property you want to buy, pick a lender that has a history of helping investors purchase that particular type.
You will also need proof of your good credit, such as income and expense statements from your current rental properties. To qualify for a loan on a multi-family property, you might need some paperwork or information that you wouldn’t need for a single-family property, so be ready to give them extra paperwork if they ask for it.
What Professionals Help You Scale Your Rental Portfolio?
Getting a skilled group of workers together is important for scaling up to multi-family properties. A well-informed real estate agent is critical, as their expertise in the multi-family market will guide you in making informed decisions about property acquisition and management.
Find people who are experts in the kind of multi-family property you want to buy. You can also get help from a professional property management company that knows the area well. As experts in the local market, they add a lot of value to the purchase process and throughout the length of your property ownership.
Choose Real Property Management Three Bridges if you need professional assistance with your rental properties. To help maximize your rental income, we offer thorough market studies and dependable property management services in O’Fallon. Whether you need advice on market trends or day-to-day management, our devoted staff is here to assist you. Call us at 636-542-8852 or contact us online at contact us to get started!
Originally Published on June 30, 2023