Investing in real estate is a time-tested investment strategy. The growing number of people looking for a rental property has brought the attention of the veteran as well as the fledgling real estate investors to the multi-family properties. As per a study by Forbes, the individuals in the age group of 20 to 34 years prefer a rental accommodation, resulting in an increased demand for rental properties.
The attraction of long term capital appreciation through the increasing property values and regular income through renting out multiple units have made investing in multi-family properties a preference of investors. A number of real estate investors and entrepreneurs like Denis Vranich are investing in real estates like multi-family homes. There are a few things that need to be considered before an investment in multi-family homes.
The primary objective of an investment is to get good returns. So, the first step should be finding out the average rent of the vicinity where the property is located. Then you need to calculate the total revenue on the basis of number of units and then deduct maintenance costs equal to about 50% of the rental amount. The remaining amount will be further decreased by deducting the mortgage payments if any. If the balance amount is insufficient as income, then you should look for other properties with a better revenue generation capacity.
Location of the building
The location of the property is an important factor of your investment decision. The ultimate objective of an investment in a multi-family property is a generation of revenue through rentals. This calls for a location with high demand for rentals so that you can have sufficient number of potential tenants available who wish to rent your property.
Another factor is that the building should not be located in a rough area as it will put the property at risk as well as it will be a cause of lower tenancy percentage. You should also make sure the property location is in the vicinity of necessary amenities and main road. A renter will prefer a property that’s closer to the road and that has all the necessary amenities nearby.
The property as your residence
This is an important factor that has its own pros and cons. The pros are
- You will be staying in one of the units, so the expenses involved in owning a separate residence will be nullified. These savings can go to the payment of the building mortgage.
- You will be onsite to look after your property and carry out the required maintenance.
- You will be available on site to handle any concerns of your tenants.
The primary disadvantage being the inconvenience of being disturbed all the time by the tenants and another factor is the building location may not be your preferred neighbourhood.
The last but not the least factor is what will you do when a tenant doesn’t pay. Can you pressurize the tenant to pay their rent? Do you have the financial capacity to pay the mortgage payments in case of delay in rent?
The multi-family homes are a viable investment option with a potential for consistent income. The potential of the tenancy model is already there, waiting for you to encash it. The success of real estate investment can be seen by the example of investors and real estate developers like Denis Vranich. His success can be an inspiration to all the investors out there and as an investor you can look through the properties owned by him to choose a property for investing.