If you are investing in a multifamily property for the first time it is very likely that you are feeling both excited and a bit apprehensive. That being the case, it is essential to go in with eyes wide open, conscious of the common pitfalls that bedevil newcomers to the space.
Here are my tips for avoiding potential heartache:
- Know All The Local Laws
The laws governing multifamily properties can be broken down into three categories — property ownership rights, tenant rights and local property standards enforcement. These are deep and complicated legal issues that generally require several sit-downs with a real estate attorney in order to gain a full understanding. Without such a consultation, you are essentially playing financial roulette with your property.
- Know Local Rent Prices
If you plan to make a decent profit on a multifamily property then you need to know exactly what rents you can charge. In addition to knowing current rents, you also need to research historical and projected rates in order to know where they have been and where they might go. Tracking the full trajectory can allow you to see exactly what sort of ups and downs can be expected over the long term.
- Master Marketing
Marketing your property to prospective tenants is a considerable challenge. It can be done across multiple platforms, including your website (featuring eye-catching photos and virtual tours), major rental sites like Apartments.com, Apartmentguide.com and Rent.com and via social media. The latter is of particular importance, since it allows you to highlight certain amenities and provide constant updates.
- Be Financially Aware
A multifamily property owner must be forever cognizant of the fact that an expensive repair might be necessary, and for that reason should be vigilant about his or her financial status, down to the penny. Face it — furnaces or HVAC systems can go kaput. Such things as roofs and windows require near-constant upkeep. Extreme weather can damage a property. Landlords need to be ahead of the curve, need to save money for (literally) a rainy day.
- Know The Maintenance Costs Beforehand
Before you even consider investing in a multifamily property be sure that you know about the costs required to maintain the property, as they can account for as much as 20 percent of an owner’s annual budget. Whether it is landscaping fees, painting fees or plumbing expenses, be sure that you have the adequate funds required to keep your property at a high standard. Multifamily properties are substantially more costly to maintain than single-family homes. Do a comprehensive monthly cost analysis before you sign a purchase agreement.
