Whether you’re new to owning rental property, or want to expand from single-family ownership to multi-family, experts offer important advice on purchasing multi-family buildings.
While multi-family ownership can generate more income, it also requires more responsibility, liability and capital reserves, according to U.S. News & World Report. However, if you buy a four-unit or less, and live in one of the units, you can qualify for a smaller or zero down payment, and it would lower your debt-to-income ratio, making you more appealing to banks for your next investment purchase. The FHA programs can also include funding to renovate your building. Starting with a smaller unit is also easier for those just getting into multi-family investing
Location. Location. Location. Do your due diligence and choose your multi-family location wisely, notably near good schools, hospitals, and businesses in a safe community, notes digital resource Fit Small Business.
Make sure you have a larger cash reserve than you think you’ll need. That way you’re covered for any unexpected repairs or other unforeseen expenses, adds Fit Small Business. If you have the funds, it’s also a good move to renovate your multi-family building to keep your units filled and reduce tenant turnover.
To determine the value of the property, do not look at price per square foot. Instead, evaluate its income and the return on investment generated, adds Fit Small Business. Look at income, expenses and rate of return for the area.
You’ve likely already gone through a single-family home purchase, but multi-family is a different type of purchase, so consult a realtor experienced in multi-family properties for a pain-free transaction, adds U.S. News. Also, take into consideration its resale value, in case you unexpectedly need to sell the property in the future, for whatever reason.
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