A multifamily property is a dwelling that holds more than one unit, allowing several families to occupy the same building. These types of properties offer several advantages to those who are interested in getting into real estate investing, especially when their resources are limited. By reviewing the benefits listed below, you can determine if this is the right investment opportunity for you.
Reduce Operational Costs
Each property you own must be maintained to ensure your tenants enjoy a habitable residence. In addition to keeping up with repairs, this will involve maintaining the grounds, looking after the HVAC units, and conducting other types of preventative maintenance. This can be significantly less costly when all of your rental units are located within the same building. You’ll save on the time it would take to travel to each location, and you’ll save money by maintaining property features that service multiple apartments.
Save on Property Purchases
A single multifamily building that holds four units is going to sell for significantly less than buying four properties of similar value in the same market. When you live in one unit and rent the others to tenants, you can maximize the return on your investment by reducing your expenses. You’ll also save on property taxes in that you’ll only be paying taxes on one piece of property, even though you’re earning income on multiple units.
Eliminate the Work of Buying Property
For each property you buy, there are several stages to go through, including the assessment, inspection, title search, and offer negotiations. Instead of trying to buy several different properties and going through these steps with each one, it’s simpler and more cost-effective to buy one multifamily home. You can find a property with the number of units you want and save time and money throughout the buying process.
Owning a multifamily home provides many more benefits than those listed here. Overall, this is a better risk because, even if half of your units are vacant, you’re still earning income from the other units. This gives you the time to rent out those other units and maximize your income. Having all of your rental units centrally located will make it easier for you to manage the property and communicate with tenants. Multifamily properties are beneficial to own in a variety of ways, whether you’re a first-time buyer or a seasoned investor.
Real estate investing certainly carries a hefty price tag. It takes a considerable amount of up-front cash to buy a property, make the necessary improvements, and get everything ready for your property to start making money for you. If you don’t have all the cash you need on hand, don’t give up hope! There are multiple ways that you can get your hands on the money that you need to get your real estate investment up and running.
Government-Backed Investor Loans
Certain loan types, such as FHA or VA loans, which are backed by the federal government, often require smaller down payments ranging anywhere from 0% to 3.5% down. While that percentage may go up depending on your credit score, as long as you’re above a 580 on your credit score, you should be able to obtain the loan for a minimal down payment. However, these loans are only available to owner-occupants of the home. To be able to get a federally backed loan, you have to commit to living in the property for at least twelve months before you begin using it as an investment. Depending on what type of renovation your subject property needs, you may be able to start working on the property while you live in it.
Home Equity Line of Credit
Often referred to as a HELOC, a home equity line of credit is a solid choice if you don’t have access to six months worth of cash or liquid assets needed to back an investment property. To get a HELOC you basically let your home stand as collateral for the loan, which means you are at risk of losing the property if you can’t make the payments. To secure the investment in some capacity, you can consider only taking out a loan for the portion of the money you need, which will minimize your risk.
Private Money Financing
Instead of financing through an institution, a private money financing option puts you in touch with a private person who has access to the funds that you need. Depending on your relationship with the lender, they may be willing to finance all or a portion of the money you need to secure your investment property. The interest rate and repayment requirements will vary from private lender to private lender, so you’ll want to be well informed before you come to any agreements.
When it comes to real estate, a foreclosure may seem like a good deal. However, those amateur investors or home flippers might not realize what it takes to make a foreclosed home into an investment that pays off. Furthermore, even homebuyers should make sure to be aware of what a foreclosure requires to make a good home.
Purchasing a foreclosed home is similar to buying a used car from an auction. Consumers can save a lot of money if they have the time to search out these deals. A little bit of luck doesn’t hurt.
However, the people who do the best with these types of sales are those who are familiar with the product and make the call whether the lower price is a deal. Just because a foreclosed home is worth less than the property assessment doesn’t mean the estimate is correct. The professionals know this, but new investors may not.
This experience and knowledge help buyers make wiser decisions and mitigate risk. Instead of just looking at the price differential, they consider factors such as location. Is the home in a neighborhood where it’s likely to sell? Does it have unique features that help it stand apart from other properties? What work will be necessary to sell the foreclosure at a profit? Even if homeowners have no plans to sell soon, they need to consider the future resale value of their purchase.
Furthermore, investors must have a strategy that includes property acquisition as well as holding it until it sells. If an investor doesn’t consider the overall real estate market, which includes job and population growth, this property could be on their hands for quite some time. Investors may even lose money due to property taxes and maintenance costs.
Finally, the smartest investors know that foreclosures may not be the way to get the most bang for their buck. Some investors spend time listings of future auctions and content owners or lenders before the auction occurs. While this might not lead to a better price, it can ensure that an investor can close by eliminating the competition and eliminate the need to have cash for an auction. That lengthy closing process can also interfere with a homeowner’s plan to move.
While every field is impacted in some capacity by technological advances, it could be argued that real estate has the longest history of shifting in new directions when technology advances. Today, technology impacts every aspect of the real estate process. Before a buyer even contacts a real estate agent to look at the house, they can take a long look at the neighborhood, thanks to satellites. It has been reported that 70% of buyers look for homes online before they begin shopping. Technology continues to alter the way that we buy and sell real estate.
While many people see the blockchain as a way to potentially support cryptocurrency, but it may have even more practical applications in real estate transactions. Real estate contracts between sellers and buyers can be done with complete encryption protection and security checks that are built into the programming. Blockchain ledgers even provide the opportunity to securely save property title logs and other documents that are needed to complete a real estate transaction.
While AI sounds intimidating to some people, it can provide the opportunity for both potential buyers and their agents to streamline their shopping process. Recent advancements have created a way for prospective buyers to get a real-life, 3D look inside a home they may be interested in without having to schedule a showing, meet with their agent and drive an unknown amount of miles to get to the address. Not only is this a great deal for buyers who may have a hard time getting their schedules to work out, but it also frees up agents who may be juggling multiple clients.
Since the dawn of real estate, agents have utilized some CRM to keep up with contact information for various clients. Modern tech advances have enabled agents and brokers to plug a client’s information into their CRM and even send them an automated e-mail every so often to touch base and see where they’re at in their decision-making process. While this may sound minimal, not having to make a dozen phone calls a day to people who may not be committed to buying or selling is enormous for real estate professionals.