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What to Consider When Buying a Multifamily Property

It can be fun to “window shop” for investment properties, but if you’re seriously considering committing to adding multifamily properties into your portfolio, you’ll need to do your due diligence. To ensure you’re getting a quality real estate deal, it will involve a combination of factors.

In this blog we’ll cover 4 factors that should be considered before finalizing the deal:

  1. Property Location
  2. Building Details
  3. Income Potential
  4. The “Cost” of the Property

Property Location

Location often tops the list of “must haves” for potential renters, so a desirable location will appeal to more tenants resulting in higher occupancy. Factors to consider when evaluating the location include:

  • Walkability, especially in larger cities
  • School district ratings
  • Crime rates and the condition of surrounding buildings and homes
  • Proximity to points of interest, shopping, and freeways

High-growth, high-yield areas where properties are in high demand and in well maintained neighborhoods are a good option for investors to consider.

Building Details

When evaluating the property, it’s important to consider several factors:

  • Unit size: consider the total number of units and the number of rooms in each unit.
  • Condition: beyond visible mold and fire damage, look at window quality, insulation, the age of heating and AC units, or anything that would need immediate repair.
  • Amenities: if goal is for the property to be considered luxury certain amenities will be expected.
  • Sales history: a property’s sales history could give an insight into any possible red flags.

If you’re just getting started with investing in multifamily properties, you should focus on one of the following types: duplex (two units), triplex (three units), and four-plex (four units). These properties offer are generally more affordable and offer the most upside with the least amount of risk.

Income Potential

Next, determine the potential income a property could generate. Rental sites can be a helpful resource for verifying rental prices, but it is important to do your due diligence. The 50% rule can be helpful, especially for beginner investors. Check out our 3 Tips for Investing in Multifamily Properties for more information.

The “Cost” of the Property

Every situation will differ when financing investment properties. Some investors may choose to live in one unit and rent out the other—allowing them to qualify for owner-occupied financing. A Yolo Federal representative can help you understand your options so you can choose the best option for your goals.

Other costs to consider include maintenance, insurance, property taxes and more. It will be essential that you are prepared to financially afford a multifamily property.

When you’re ready to take the next step to expand your investment portfolio, we’re here to provide you with the resources and tools to help you achieve your financial goals. To get started, schedule a call with a Yolo Federal representative or click here to learn more about how to apply.

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