What Is a Multifamily Property?
A multifamily property is a residential building that contains multiple housing units. It has numerous flats for families to live in within a space. They can also be several buildings within one complex
Each unit has its own living space, a separate kitchen, and a bathroom. A multifamily property will generally own the property and the land on one recorded deed.
This Is very common in Nigeria.
As common as it is, some real estate investors do not know the power and opportunities of owning a multifamily housing property.
This property is divided into units, popularly known as flats, and they can be units of 1, 2, 3, 4, or even five bedrooms. It is an excellent form of real estate investment, as we see in this post.
A multifamily property, also known as a multi-dwelling unit (MDU), is a residential building with two or more units under one roof.
The multifamily property is a great wealth-building tool. Let’s dive into its learning.
What To Look For When Investing In Multifamily Properties
If you do not have a property that generates constant income, I’d advise you to look into owning a multifamily property.
To get started in this wealth-building journey, you must first understand that searching out this type of building is different from the way you searched for the last flat you rented.
It is not a Sunday afternoon inspection, NO! that will not be enough to get the best houses.
To make the best house-buying decision, you must do your due diligence. This includes locating a property that is below market value and carrying out efforts to analyze and assess its financial sensibility.
You also consider factors like purchase prices, long and short-term costs, and the estimated amount for rentals. Focus more on numbers in the first part of buying the property.
- The Location
In real estate, location is the number one commandment. Location determines everything: from price to the type of clients and the area’s ROI and development. So it is also more critical in the selection of multifamily properties. The location must be desired, so as an investor, you should look for high growth, fast development, and well-maintained areas.
- Number of Units or Flats
The next step is to consider the number of flats or housing units you want to invest in and the number of rooms in each unit.
Houses with two units are called duplexes, Triplex are houses with three units, while four units are called four-plex. Having this type of property offers you the least risk for beginner investors, and they are more affordable and generate more income. The more units you buy, the more money you can make in the long run.
- The Potential Income
The next step is to determine the revenue that the property can bring in for you. Take the time to calculate how much you can charge per flat, and how much each apartment can bring you. Practice due diligence to get all these details before investing in a housing unit
- The Costs
Financing real estate investment from several sources means you have to put in plenty of considerations when calculating the cost of a building. Suppose the purchase of the property is being financed by numerous bodies or a loan company with interest at heart. As the house owner or investor, you have to consider what the multifamily property is bringing in.
If you decide to take one of the flats in the house, the flat won’t produce income for you, thus reducing the money coming in.
The cost of purchasing the property, renovation, and setting it up for renting are also to be considered and calculated against the period it will take to accrue the capital.
- The Seller
An essential consideration when buying a new home is the seller. Who Is selling this home? Why is the home being sold? It is necessary to know the seller and the motivation behind the sale.
Other questions to ask in this segment include knowing if the property is bank-owned or a sale by the property owner. A bank-owned property is sold completely differently from that of the property owner, and the deal made by the owner is more cost-effective than that owned by the bank.
Benefits of Multifamily Property Investing
As a beginner or experienced real estate investor, investing in multifamily properties is a good strategy among investors, as it provides an additional source of income yearly and even monthly. It also offers a slow but steady appreciation. Here are some of the other advantages of owning a multifamily property.
- It creates more significant cash flow for you: multifamily buildings produce more outlets for income. The beauty of investing in multifamily buildings is apparent for all to see, and the investor can even live in one of the units and still get money from the other units within the building complex.
- Numerous Tenants: Multifamily properties produce more tenants, and when one tenant moves out, it doesn’t affect the property’s income so much. The income will then be back to normal when another tenant moves in.
- It Gives You More Control Over Value: The more income a property receives, the higher the value is. Multifamily properties are made up of numerous flats or units, which means the owner is earning multiple income streams. Therefore, these investments are generally valued higher than single-family homes.
- Ideal For Property Management: Single-family properties do not generate enough income to justify you hiring a property management company for it. In the case of a multifamily property, enough revenue is generated to allow investors to hire a property manager to handle repairs within the building premises. This is of great benefit for investors who wouldn’t like to be involved in the daily running of the property.
You can begin or increase your real estate portfolio by getting a multifamily property today. Feel free to ask any questions and leave your contribution in the comment section if you have any.
