Should You Invest in a Multifamily Building?
A sound investment strategy is the key to building residual income in the property management industry. The promise of collecting a lifetime supply of rent payment can be quite short lived, however, if you end up getting in over your head. The process is akin to new homeowners. The joy of living independently often overcomes the facts and responsibilities that come with ownership.
If something breaks, you have to pay for it, as you are the property owner. When you want to move, you cannot simply terminate or wait for your lease to expire; unless you can find a buyer for the property, the lending institution will have full ownership. As the owner, not only are you faced with regular maintenance and upkeep expenses, you also are letting strangers live in the property.
The right tenant can make for an easy rental. The wrong ones not so much. Individuals new to the business of property management are better off starting with small single or multi-family dwellings. Besides, commercial offices and upscale apartment complexes are probably out of your league as far as budget goes at this point. Making smart decisions and staying the course is a surefire way to make these lofty property aspirations a reality.
Multifamily Must-Haves
A basic cost evaluation on a given property can be performed within 5-10 minutes, granted you have the needed data. Calculate the total potential rent payments (know how many units and what sizes are available), then subtract the mortgage and repair expenses from the figure.
Error on the side of caution. Assume 30% rental vacancy and factor in major maintenance costs (e.g. plumbing, HVAC, and electrical). Location is crucial for securing the maximum number of tenants. Area competition is something to keep in mind. If after all of this you are still in profit, then make the go ahead to shortlist the property.
Another factor to take into account is security. Is the building located in a neighborhood where crime rates, specifically burglaries, are high? If so, be ready to pay higher than average property insurance premiums. To keep these down and protect your investment and tenants from loss, installing a new security system and/or hiring guards should not be out of the question.
Unexpected costs are the norm with most multi-family buildings, but the value of your property management is not one of them. Expert Property Management is here to make your next investment worthwhile.
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