Many real estate investors decide to buy a multifamily property after owning one or two single family rental houses.
While the asset classes are similar, there are some distinct differences between owning single family rentals and buying a multifamily property.
Before You Buy A Multifamily Property
Here are some general things to consider before you buy a multifamily property.
These are general comments. They will vary depending on what market and what country your real estate investments are:
Exit Strategy – Before you buy, think about selling
When you invest in a single family home as a rental, selling it is easy.
That’s because you have a bigger buyer pool. You can sell a rental house to another real estate investor, to the tenant, or to an owner-occupier who is buying the house to live in.
Selling a multifamily property is different. Yes, you could ‘go condo’ by turning each rental unit into a property for sale. But often times that’s easier said than done.
When the time comes to sell your multifamily real estate investment, your pool of prospective buyers is going to be other income property investors.
Unit Turns – How quickly can a vacant unit be made rental ready?
We all know that time is money. This is especially true when it comes to property managing and leasing multifamily property.
The term ‘unit turn’ refers to how quickly any needed repairs and updating can be done when an old tenant moves out and a new one moves in.
Some of the keys to turning a unit quickly include having the same fixtures, appliances, paint and flooring in each unit of your multifamily property.
Tenant Types – Understand who you are renting to and why
Knowing the type of tenant you will be renting to is key to successfully investing in multifamily property.
You will also want to have a firm understanding of the unique characteristics of your specific tenants.
For example, young professionals in an urban area will expect more amenities and stylish decor. Other renters are just looking for a simple place to live.