23 Aug Preparing to Buy Your First Multifamily Property
Have you been thinking of buying a multifamily property? Finally ready to take the plunge? It can be as daunting as it is exciting. Remember, there are a multitude of things that you should consider prior to buying a multifamily property, especially if you plan to use the property for investment purposes as the multifamily sector can be incredibly lucrative. In fact, according to the National Multifamily Housing Council, more than $90 billion have been contributed economically thanks to multifamily properties. So, If you have been flirting with the idea of buying one of these properties, make sure you consider these things first to ensure you’re ready to jump into the multifamily world.
#1- Know Your Budget
You may be thinking that this is a no-brainer, but I’m not only talking about the price tag on a property. You need to take all expenses into consideration before committing to buying a property. The obvious expenses include operating expenses, unexpected maintenance expenses, property taxes, and insurance. But, how are you going to find tenants? Who’s going to manage the tenants rents, repairs, and complaints? Let’s say you have $2 million reserved for this real estate venture. This does not necessarily mean you can spend 100% of that amount on the property itself. Keep various current and future expenses in mind, as they can arise unexpectedly. Organizing your budget prior to beginning your search can save you time and money, ensuring that you are only exploring relevant properties that fall within your realistic budget.
#2- Choosing Your Location
We’ve heard it all before — Location, location location. However, there is a reason for constant repetition. Location is pivotal for the success of your multifamily property. You may have a location in mind, but be sure to research a variety of locations before settling on one. You do not have to necessarily buy a property in your state, and you can explore other places with strong economies, populations, demand, and diversity. Cap rates, rental rates, and returns vary based on location.
Researching location may also help you determine what type of multifamily property you should invest in. Rental rates change depending on the area of town and different types of multifamily properties are successful in different areas. One and two bedroom units may be more successful near college campuses or in a downtown area, for example. If you need assistance with this, never fear — you can always refer to your trusted real estate professional!
#3- Picking An Agent
Speaking of real estate professionals, it is up to you if you choose to work with one. However, teaming up with an experienced broker or agent can be an invaluable choice. Some worry that working with a CRE agent can be costly. However, it is much more likely that you will end up saving in the long run. Agents have years of experience in things like market conditions, negotiations, and property knowledge. They spend every minute of the day in this world and can provide priceless insight that may save you days of research. This experience can help you get the best deal possible.
#4- Considering Financing Options
Financing goes hand in hand with your budget. Some real estate buyers are fortunate enough to be able to work in cash transactions. However, many choose some form of financing to fund their venture. Before securing financing be sure your credit score is in good standing, especially as a first-time buyer.
Without prior investment history, lenders will look toward your credit history to qualify you for a loan. There are various ways to secure financing, and your CRE professional can help suggest some. These include traditional financing, bridge loans, crowdfunding sources and more. I will be sharing more details on financing in another article soon!
Buying a multifamily property can be an extremely beneficial choice for a green, or seasoned real estate investor. So whether you are thinking of buying your first investment property or diversifying your portfolio with a multifamily property, take a look at this list, and do not hesitate to contact me today with any additional questions you may have. I’m the Multifamily Specialist here at Elifin and I’d love to chat about your investment plans! 225-659-8656 or email@example.com