If you have been thinking about getting into a larger investment within rental housing, buying yet more houses might seem a bit unwieldy. It can be difficult to make repairs and keep up with tenants when your investments are all over town! However, the multi-family building has the advantage of having multiple units in one spot. When most people think of apartment buildings, they might think of massive buildings that cost millions of dollars, but that's not always the case. Small buildings starting as small as a duplexes or triplexes and going up to 4-10 units can be well within someone's price range. Many of these buildings are coming up for sale as older owners look to exit the business. This means there is tremendous market opportunity and these buildings usually have tenants already in place and they are already generating income. This can make getting financing or finding a partner much easier than buying an empty house.
However, there are some important things to remember when thinking about buying an apartment building.
Don't Sound Like an Amateur
Multi-family is firmly in the domain of the professionals. Make sure that you can speak with them in a professional manner and use the right language. If you call a broker and you're not up to speed, it may be difficult to change the perception later on. How do make sure you sound educated? Taking Building Your Rental Property Portfolio can help get you clear about the deal, how to read the MLS, and other important data. You can also read books on income property, property management books and seek out other online resources.
Get Ready to Run the Numbers
An income property is supposed to generate income! This means that you have to make sure that the money works. You have to be able to analyze a deal and see if it makes sense. Does the property generate enough income to meet the financial demands of maintenance, investors, and/or mortgage? What is the long-term outlook? What kind of shape is the property in? Will it require major work? Is the value there to make it all make sense? Once you have gotten clear on the cash-flow potential, you can decide if you and your business are ready for the deal.
Find a Great Broker
This is where RHAWA can be helpful to you. Using our Vendor Directory, you can interview with different brokers and decide who you want to do business with on these deals. Once you have worked with a great broker and enjoy doing business with them you can continue to seek out deals or you can simply have them available when you are ready to sell yourself. Knowing a good broker can also open you up to opportunities to invest or partner with people you might never otherwise meet. If you're looking at portfolio growth, this networking is crucial!
Learn How to Raise Money
Some people will be able to handle their own financing on these sorts of deals, but many others will need to raise money to make it happen. The key to raising money is not to wait until a building is ready, but to get commitments before hand. Tamara Simon wrote a great article for Current about her experience with a partner and the process of how she found someone to work with in order to do a deal. Getting commitments from people in advance, finding the right opportunity, and then presenting that to your investors or partners is a great pathway to being able to close a deal quickly.
Many housing providers avoid multi-family as being simply out of their price range, but with the right broker, partner, investors, and resources, you can find and close a deal on a multifamily property!