Many of us consider whether buying a multi-family rental property is a good option, in terms of being, a component of one’s investment strategy and process. Like anything else, a savvy consumer researches and becomes familiar with the potential pros and cons, and if it’s for them. It is important to understand and evaluate the best buying opportunities, whether to sell or rent is the best strategy. Should I buy a new property or an existing one? With that in mind, this article will attempt to consider, examine and briefly review when and if someone should buy, and whether it is the best time to sell and/or if renting might be the best strategy. and approach.
one. 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 owner-occupied, but you will also receive less rental income. Those who do often see this as a way to use rental income to significantly reduce their own housing costs. If you’re looking at this as an investment, then your mortgage interest rate will be a bit higher, your down payment a bit more, and you may need to justify the feasibility of the purchase based on rents. One formula, I suggest, is to receive a 6% return and positive cash flow. This means that if the property costs $500,000, it must have a rental record of $30,000 net per year, after deducting property taxes, and utilities paid by the owner/landlord, and basic maintenance. So, if 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 months of rent, to prepare for potential vacancies, etc. Also, calculate the rents and compare them with your expenses, and proceed, only if it is a positive cash flow and the 6% return is achieved.
two. Sale: Is owning the best idea for you? Are you prepared for unexpected expenses and will you commit to setting aside a reserve fund for maintenance, repairs and renovations? Is the real estate market right now to get the best results from a sale? Consider the competition, the local market, mortgage interest rates, and how much you feel, need, from any transaction.
3. Rent: Make sure you do a quality, legal and enforceable selection process, and look for the best tenants. There’s no guarantee, but getting the pricing right, to make sure it’s not the most expensive, often creates the best opportunities. You must also have the ability to do many of the repairs, etc., or have qualified service technicians to prepare for the possibilities and pitfalls.
Like any investment, you must proceed, in the most prepared way possible, to make the best possible decisions. It may or may not be for you, so go ahead with your eyes wide open!