Choose a Property Type
Under any circumstances, the first thing to determine about multi-family rental properties is the two primary classifications. Multi-family buildings with four or fewer units are classed as residential properties, while a property with more than four units is conventionally referred to as commercial. In most cases, the size of the multi-family property you choose to get will basically direct how you search for, assess, and price it. Multi-family properties with four or fewer units are most often financed with residential mortgages, in the same vein as buying single-family properties.
At the same time, be aware that commercial property is purchased with commercial debt and priced based on a value formula, not comparable properties. Spending on a commercial property can be quite a challenge and even a hindrance for anyone who hasn’t gone through the process before, so multiple rental property owners decide on taking smaller multi-family properties for starters.
More Units = More Preparation
Even if you opt to possess a multi-family property with four or fewer units, more preparation will be needed than acquiring single-family rentals. Case in point, location is a crucial factor in any effective rental. Yet for multi-family properties, location can be even more than salient, especially the property’s proximity to public transit or other amenities. It’s especially important to very carefully study the area’s cost of living, crime rate, and average income level.
Even while looking up numbers online can be useful, they don’t always tell the whole story. Especially accurate in areas that have experienced recent changes (either positive or negative). Besides your other research, find a time in your schedule to drive to the neighborhood and stop by the local police department to get a more accurate view of the area.
Prepare Your Finances
Before you start your property search, it’s beneficial to scrutinize lenders and get your finances in order. Depending on what type of property you love to buy, you’d want a lender with a reputation for helping investors purchase that particular property type. You will additionally need to carefully prepare documents supporting your creditworthiness, namely income and expense statements from your current rental properties. There may as well be documents or information required to qualify for a loan on a multi-family property that you wouldn’t generally prepare for a single-family property, so be ready to impart additional documents when they ask for it.
Hire the Right People
As a rule, productively scaling up to multi-family properties should be matched with having excellent professionals on your team. For example, you might consider finding and enlisting a real estate agent with comprehensive knowledge and experience. If that is possible, get one specializing in the type of multi-family property you hope to procure. You may also definitely want to gain the local expertise of a professional California, MD property management company, for example, Real Property Management Gold. As a local market expert, we assuredly contribute significant value to the purchase process and throughout the lifetime of your property ownership.
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