What to Consider When Investing in Multi-family Real Estate
When you purchase a multi-family property, it’s a major responsibility because you have multiple units and multiple tenants that you have to manage, and both will require lots of attention. This makes it especially important that you consider all aspects of purchasing and maintaining such multi-family dwellings, so that you can keep them running smoothly, and so you can keep tenants happy.
Number of units
Particularly if you’re a new investor, it’s important to have an understanding of how many units you can actually manage effectively. It’s probably best to start out with managing a duplex or triplex, because anything more than that may extend you beyond your actual capabilities. If you get into a situation where you have too many units to manage them effectively, things will start slipping through the cracks.
Laws and ordinances
When purchasing any property, but particularly when investing in a multi-family dwelling, you need to be aware of all local ordinances and laws, whether these relate to city statutes or state laws. Many areas have rent control laws, and there are probably also some local ordinances which affect how you can evict tenants. Be aware of all of these, so that you don’t run afoul of local or state authorities.
It’s always a good idea to have a good awareness of the location of any multi-family dwelling you might be interested in buying. For instance, if a particular location has a glut of apartment complexes, you will probably have serious competition for renting out your multi-family dwelling. The location of a building you purchase may also have an impact on the kind of tenants which apply for lodging.
Management of the property
One major consideration you should be aware of is whether you intend to manage the property yourself, or whether it’s more appropriate to hire a property management company. When considering this, think about how much time and energy it will take to effectively manage the unit you’ve purchased. If you are already employed and don’t have much free time, it may be to your advantage to hire a property management firm.
It will also allow you to have some time to yourself, rather than being committed to full-time maintenance and service requests from your tenants. There’s another advantage to hiring a property manager, especially one who is quite experienced in the field and can be a big help to you. An individual like this will have a good understanding of all the issues and complexities normally associated with a multi-family dwelling, and they can help you stay in compliance with all ordinances which may affect your property.
The more units that you own, the more maintenance you can expect to be required to perform on them. Some of this maintenance will be while the unit is occupied, some will occur during the turnover, and some will be general maintenance, but all of these should be factored into your time and resources availability. Make sure you also keep in mind any monthly recurring expenses which you’ll have to cover for the facility, for instance trash service, utilities, pest control, and landscaping. If the dwelling typically has a high turnover rate, you can count on extra maintenance which will be normally needed in between rental periods.