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Investing in Multifamily Real Estate

May 29, 2020

You’ve been investing in the real estate business for a while, but you want something that will be a challenge. Multifamily properties may very well provide that challenge you are seeking – with great potential for reward. Are you determined to take on the increased responsibility, liability, and capital reserves required to buy a multifamily property? In order to find out if this is truly what you’re aiming for, we’ve compiled a few reasons why this is a great investment and what you should expect. 

Know What You’re Getting Into

Here’s a starter question: Do you want to be a landlord for reasons other than the money? Your due diligence to taking on this type of property should include an attitude check to determine if you want to deal with the management. Headaches that come with a property usually are based on the quality of the neighborhood and the age of the property. These facts can be determined by the properties classification — either as A, B, C, or D class property (A being in the best condition) — and buy according to your financing and budget. There is often less inventory of multifamily properties than there is for single-family properties. This means you may have to sacrifice location or property condition to find one in your price range. In many cases, investors often fail to confirm property is legally zoned for its use and number of units. It’s also good practice to have a property lawyer set up your leases and an LLC to own the property.

Ask for Detailed Paperwork

Request income and expense statements for the current and previous years, current rent rolls, service contracts and all existing reports. Go over all of this paperwork you’ve obtained and make sure the historical information matches with your expectation of the current operations- if they don’t, make it a goal to find out why. Make yourself very familiar with the vacancy rate in the neighborhood and make sure to talk to the tenants directly to get honest feedback about the building’s condition and potential problems. Verify proof of rental payments, copies of leases and have security deposits transferred to you and meet all of the current occupants. 

Benefits of Investing in a Multifamily Property

  • Bigger Cash Flow If a single-family property generates a single monthly income, why not invest in a multifamily property producing multiple forms of income? These investments represent an innovative opportunity to generate additional income from one investment. As an added note, some investors may have the opportunity to live in one unit and rent out the others for income.
  • More Control Over Value – The more income that a property receives, the higher the value is. The more units there are to be occupied, the more monthly payments received. 
  • Larger Pool of Tenants – Less risk is involved in investing in a multifamily property. Unlike single-family properties, where income is lost when the home is vacant, multifamily properties have numerous units and alleviate the total economic loss for investors.
  • Scalability –  Multifamily investments epitomize scalability. Rather than purchasing individual properties and slowly growing your business one by one, these investments present the opportunity to acquire multiple properties within one building. Maintaining this type of property also allows you to increase your portfolio. 

Looking into investing in a multifamily property like an apartment complex in the Middle Tennessee area? Does the complex need professional property management? MMC Properties is available to assist you! Contact us at (615) 849-9006 and browse our investor information today.