Many of us consider whether purchasing a multi-family rental property is a good fit, in terms of being, a component of one’s investment strategy and process. Like anything else, a smart consumer investigates and becomes familiar with the potentials, the pros and cons, and if it is for them. It is important to understand and evaluate the best buying opportunities, whether to sell or rent is the best strategy. Should you buy a new property or an existing one? With that in mind, this article will attempt to briefly consider, scrutinize and review when and if someone should buy, and if this is the best time to sell and / or if renting might be the best strategy. and approach.
1. Before buying: There are many considerations before purchasing a multi-family rental property. Are you going to live in one of the units or are you going to rent the entire property? If you live there, your mortgage interest rate will be lower, because it will be considered an owner-occupied property, but you will also receive less rental income. Those who do often see this as a way to use rental income to significantly lower their own housing costs. If you’re looking at it as an investment, then your mortgage interest rate will be a little higher, your down payment a little higher, and you may need to justify the feasibility of the purchase, based on rents. I suggest that a formula is receiving a 6% return and positive cash flow. This means that if the property costs $ 500,000, you should have a net income of $ 30,000 per year, after deducting property taxes and utilities paid by the owner and basic maintenance. So if your taxes were $ 10,000 and anticipated utilities and basic maintenance were an additional $ 5,000, then you must collect at least $ 45,000 per year in rent. Do this calculation, based on 10-month rentals, in order to prepare for potential vacancies, etc. Also, calculate the rents and compare them to your expenses and proceed, only if this is a positive cash flow and 6% return is achieved.
2. Sale: Own the best idea for you? Are you prepared for unforeseen expenses and will you commit to setting aside a reserve fund for maintenance, repairs and renovations? Is the real estate market the right one, now, to get the best results from a sale? Consider the competition, the local market, mortgage interest rates, and how much you think you need from any transaction.
3. Rental: Make sure you go through a quality, legal and enforceable screening process and look for the best tenants. There is no guarantee, but the right price, to ensure that you are not the most expensive, often creates the best opportunities. You must also have the skills to do many repairs, etc., or have qualified service technicians, to prepare for the possibilities and obstacles.
Like any investment, you must proceed, in the most prepared way, to make the best possible decisions. It may or may not be for you, so proceed with your eyes wide open.