Are you planning on investing in a multifamily investment property for the first time? If so, you’ve come to the right place!
In this article, I will share with you the important things that you should do before investing in your first multi-family investment property.
Research The Area Where You Plan On Buying There
The first thing that you should do before investing in a new multi-family rental property is to research the area where the property is located.
Your research should include investigating the local jobs market, cost of living, things to do in the area, public transportation, shops, stores, and the proximity of the multi-family Property to major employers in the area.
Once you research the area, you should then do a comparable analysis of the property to verify if it may be overpriced and offers amenities that are similar to other properties in the area.
Thankfully, the internet offers you a wide variety of tools that you can use to research an area before purchasing a new multi-family property there. One of the best tools is Google Maps because you can get a street view of the area which essentially will allow you to “tour” the area virtually before visiting it in person.
Depending upon the area, you should also take the time to consider the class of the multi-family property that you plan on purchasing.
Even though many investors aspire to invest in Class A properties, if it’s indeed your first property, you should invest in a Class B or C building because those properties are almost always in demand and are easier to fill vacancies compared to Class A properties.
Build Your Team
Another important thing to do before investing in the new multi-family property is to build a team of people that can help you with purchasing and managing that property.
Your team should include people like a mortgage broker, insurance broker, attorney, contractor and of course a property manager to help you manage the property once you purchase it.
Unless you connect with companies that offer nationwide services, you’re going to have to build a new team each time you invest in a multi-family property that’s not located in the city or state that you currently live in.
When choosing new members for your team, be sure to pay close attention to the experience level that each team member has to offer. Thankfully, the internet gives you the ability to research companies from the comfort of your own home but it’s always best to verify the experience level first before hiring them.
You can do this by viewing their website, social media profiles or reviews on websites like the Better Business Bureau or Yelp.
Time For Due Diligence
The multifamily investment property that you’re thinking about purchasing may look good on paper but, the reality is that unless you do your due diligence, you’re never really going to know the truth about what you’re planning on purchasing.
Due diligence means that you’re going to take the time to thoroughly research the books for the property so that you can confirm that the property’s net operating income, expenses, and repairs match up to everything that the current owner has said about the property.
During the process of doing your due diligence, you should ask the owner to provide you with all the current paperwork for the property including expense statements, rent income, service contracts, current rent roll and any other additional documentation about the property.
To dig deeper into the financials of the multifamily property, you should also verify that the owner has proof of rental payments and copies of their tenant leases.
Once you have all the financial documentation for the property at your disposal, this should give you more than enough information about the property and the confidence that it’s going to be the right investment property for you.
Last, of all, your due diligence efforts should also include asking yourself if you are ready to manage the multifamily rental property yourself.
If you’re not ready for managing the day to day operations of managing a multifamily investment property then it’s best to hire a property manager.
Have A Strategy For The Property
Another important thing to do before purchasing a multifamily property is to have a strategy for that property. This means that you need to ask yourself if that property is going to be a long term rental, short term rental, Fix and Flip or a buy and hold property?
Once you have your strategy defined, this will help you to also know what is the next step that you should be taking with that investment property.
After defining your strategy for the property, the next thing that you must do is to think about how much capital will be needed to maintain that strategy over the years that you own the property.
Having a strategy is important because, as we’ve seen in 2020, it’s vital for investors to have the right strategy in place especially to help them get through difficult economic times which also may cause prolonged vacancies.
Cash reserves are always one of the best things to help investors survive difficult economic times. Your strategy should include building cash reserves because you never want to assume that all the units in the multifamily property are always going to be occupied.
Your strategy must also include if you plan on purchasing a multi-family property that is 5 units or less. This is important because you could potentially live in one of the units, qualify for owner-occupied financing, and pay little to no money down to get into that property.
Invest Passively And Work Less WIth Trier Capital
There’s no doubt that investing in multifamily properties is a great way to build wealth but it can take a lot of time, money, and hassle if you plan on doing everything yourself.
The good news is that with Trier Capital, you can invest in multifamily real estate without having to deal with everything yourself.
To learn more about how to get started with investing in multifamily real estate, and build passive income streams, contact us today by calling (630) 229-2383 or click here to connect with us online.