A multi-family home, whether a simple duplex or a small apartment complex, gives you more bang for your real estate dollar since you can have multiple tenants supporting one property. This can minimize the chances of dealing with vacancies and no incoming rent to cover the mortgage payment, which then means more profit. The following advice can help you make a wise decision when choosing to invest in your first multi-family property.
Tip #1: Know the Historical Rental Rate
Although it is possible for a new landlord to come in and reverse a poor rental trend, it takes time and effort. It's best to opt for a home that historically has had steady tenants, both in longevity of the leases in the percentage of units rented. Avoid properties that have sat for long periods of time with more than one open unit. This is uncommon in most rental markets.
Tip #2: Learn What Is Popular
Chances are a certain type of multi-family housing is more popular in the area you are looking to buy. For example, condominium style homes are often popular near areas that draw a lot of young, childless professionals because they don't want to deal with any form of upkeep. Duplexes or multiplexes with small yards and outdoor communal areas are usually more attractive to families with children, who want areas for their kids to play outside both alone and with the other neighborhood kids.
Tip #3: Budget for Profit
It's best to select homes where you can make the mortgage, maintenance and tax payments on just half the properties' income. This way, you are at least breaking even as long as half of the property is being rented at any given time. Each additional unit rented will then be profit. The only real exception to this rule is if you are living in one unit, such as you live in one half of the duplex and rent out the other half.
Tip #4: Plan for Ongoing Maintenance
Often, single family homes can be managed without the need for an outside crew. The renter tends to handle basics, like yard work, and more major issues, such as plumbing repairs, are dealt with as they occur. With multi-family units, there needs to be someone in charge of landscape and communal area maintenance. In some cases you can offer reduced rent to one tenant in exchange for these chores. This is often a viable solution for smaller homes, such as duplexes. Larger properties, such as small apartment complexes, benefit more from having a dedicated maintenance person or the aid of a property management company to maintain both the exterior and interior of the units. Make sure you know the cost of this service and figure it into your final property costs before deciding whether the property fits into your budget.
For more information, visit local real estate companies, such as http://www.primerealtygroupinc.com/.