If you’ve thought about investing in real estate, a multi-family property can be an advantageous investment. These types of properties can be excellent ways to make money, but can also be a financial drain if not planned for properly. Before you decide if a multi-family property is right for you, there’s a few things you should consider.
The type of multi-family property you buy will ultimately make a difference. For example, owning an apartment will require a different level of commitment and assistance from third parties than owning a two-flat home. Have one or two property types in mind before you begin. This will help you narrow your search to find the right dwelling.
Depending on your current situation, you might be planning to purchase a multi-family property and live in one of the units. If so, consider how this will change your lifestyle. Are you able to move in right away? Does work need to be completed first? Can you get out of your current lease? Do you need to sell your current home first? Look at your living situation and how it will change based on the purchase.
Depending on where you live, the location where you can buy a multi-family property might be somewhat limiting. These types of properties are often located in urban areas. If you’re planning to live in the property, this is a doubly important consideration because it will ultimately impact your everyday life. If you will not be living in the property, you’ll want to consider the proximity to your current location or where you’ll be living once you’ve purchased the property. If you are showing the property or completing maintenance, you’ll want to make sure the commute between your home and the property is manageable.
When it comes to your investment, location is an important consideration. Buying in sought-after neighborhoods could mean your property will increase in value quickly, and finding tenants to rent out your units will be easier.
Buying a multi-family property also means financial complexities. If you work with a tax or financial professional, it’s in your best interest to discuss purchasing a new property before you do so. Tax write-offs and deductions can be tricky, so it’s best to involve a specialist who is trained in these matters to help you navigate the purchase and what comes next.
Qualifying for a multi-family property loan is a little trickier than qualifying for a typical mortgage. You’ll need a large down payment and good credit to qualify. Working with a lender familiar with the purchase of multi-family properties also can help you determine how to leverage the potential rental income.
You’ll also want to consider the overall potential rent an investment property brings in. Look at similar rental properties in the area to get a good idea. Consider the impact on your finances if one or more of the units are not rented out right away or at any time during ownership.
Although a property may appear to have two or more units, do you know if they are legally defined units? Make sure the property you are considering purchasing is completely legal before you move forward in the process.
Purchasing a multi-family home can be a great investment, but above all, proper preparation and understanding of your decision is the most important consideration.
To find out if investing in real estate is the right decision for you, find a qualified real estate professional.
*Source: Multi-family residential