Things To Consider Before Investing In Multifamily Properties
Are you planning on investing in multifamily properties for the first time? If so, you’re not alone!
Multifamily properties are more in demand in Portland, and across the United States, than ever before because the typical apartment complex is usually located close to the big city, and renters like to have the convenience & flexibility that comes from living in a multifamily property.
Even though a multi-family property is an excellent investment, there are several things that you should consider before you invest in your first multi-family property including the following:
Multifamily Class Type
One of the most important things to know about investing in multifamily properties is that there are three different classes of multifamily properties to choose from including Class A, Class B, and Class C Properties.
CLASS A Multifamily
These properties represent the highest quality buildings in their market and area. They are generally newer properties built within the last 15 years with top amenities, high-income earning tenants, and low vacancy rates. Class A buildings are well-located in the market and are typically professionally managed. Additionally, they typically demand the highest rent with little or no deferred maintenance issues.
These properties are one step down from Class A and are generally older, tend to have lower-income tenants, and may or may not be professionally managed. Rental income is typically lower than Class A, and there may be some deferred maintenance issues. Mostly, these buildings are well-maintained and many investors see these as “value-add” investment opportunities because the properties can be upgraded to Class B+ or Class A through renovations and improvements to common areas. Buyers are generally able to acquire these properties at a higher CAP Rate than a comparable Class A property because these properties are viewed as riskier than Class A.
Class C properties are typically more than 20 years old and located in less than desirable locations. These properties are generally in need of renovation, such as updating the building infrastructure to bring it up-to-date. As a result, Class C buildings tend to have the lowest rental rates in a market with other Class A or Class B properties. Some Class C properties need significant reposting to get steady cash flows for investors.
Rent Roll And Expenses
Even though the multifamily property that you’re considering investing in may look like a fantastic deal, the only way that you can know for certain what that income the property is brining in is to analyze the rent roll.
Learn More About The Location
Besides analyzing the rent roll and expenses for the property, another important thing that you should do before investing in a multi-family property is to take a hard look at the location where the property is located.
This is important because, over the last 12 months many cities across the United States, have seen their share of social unrest so it’s important to thoroughly analyze the location of a property before your invest there.
During the process of analyzing the location, you should also pay close attention to property values in the area as well so you can determine what comparable properties in the area are currently priced at.
Talk With The Current Tenants
After taking the time to do your due diligence work before investing in a multi-family property, you should all spend some time talking to the current tenants.
This is important because, having a conversation with your tenants will help them to see you as being more than just the landlord, they are going to tell you what it’s really like living in that property, and if there are any deferred maintenance issues that you should know about.
Hire A Property Management Company
Last of all, but most important, after closing on a multi-family property you shouldn’t hesitate to hire a property management company to manage that property for you.
A property manager will save you time, money, and hassle of managing that multifamily property yourself so that you can earn passive income.
Contact Rent Portland Homes – Professionals
To learn more about the things that you should consider before investing in a multi-family property, or speak with us about our Property Management Services, contact us today by calling (541) 447-7735, or click here to connect with us online.