Multifamily real estate investing can be made simple. Multifamily real estate is mainly a vehicle to produce consistent monthly income and is featured to have multiple units within the property. This means more than one family can live there. Moreover, with the amount of units being more than 1, you will be more likely to generate consistent cash flow and (maybe) appreciation if everything goes right – compared to single family properties.
The basics of investing in multifamily real estate is pretty straightforward. The more difficult part comes from finding, closing, and managing these properties. So, let’s take a look on ways we can get started in multifamily real estate investing and how much potential cash flow can be generated for investors like you to achieving results single family homes struggle to get.
Finding Multifamily Real Estate Deals
One of the best ways to get started in investing in multifamily properties is searching for them. By searching for multifamily real estate, you will be able to get knowledge of local real estate for sale near you. Plus, you will be able to see the average prices and will allow you to figure out a range and ballpark of what you can possibly close on.
A couple great websites to get started on is Loopnet.com and Ten-X.com. Also contact your local real estate agent to provide you with any listings they might know about as well. As a result, these 3 sources should be enough to find a great property.
Qualities of Great Multifamily Real Estate
Every piece of real estate is usually a little different from one another. No two properties are the same essentially. Sure, the building might be the same, but one might have foundation issues while another does not. Which one to purchase? Purchasing a property without the foundation issues might be better.
Other great qualities of Venice multifamily real estate is fresh looking exterior paint and landscaping. This shows the owner is taking reasonable steps to keep the property looking tip top shape. Of course, they’re many other features to look for. For example, how are the roofs, and the interior condition? View the property up close in person for maximum in depth overview of the potential property.
An Example of a Multifamily Real Estate Investment Deal
Now we will breakdown a potential multifamily real estate investment deal. First, we have located a (made up) 18 unit apartment building with a 6% capitalization rate offered for 3 million says the owner. Is it worth it? Well, let’s see. 6% of $3 million is $180k in annual net operating income. If you do 20% down, your cash investment is $600k.
Even if property values go down, in 6 years or so would you get your money back just from cash flow (plus you still own the building). If property values go up and the building is now worth 4 million in 2 years, what happens when you sell? So, we sell for 4 million, we give the 3 million back to the bank, keep our $360k net income from cash flow over 2 years, and get our $600k original investment back, what do we have now in 2 years? Total of $1.96 million leftover that goes to you.
That is 200% gains in 2 years before taxes. And that is happening probably every day. If properties value drop and there is an economic panic, sure it won’t be good to sell at this time, but hold on and wait it out. If everything goes south, well that is the risk of multifamily investing and if it was easy, everyone would be doing it.
Call Jeramie deBerard, Realtor®