Multi- family property is a very lucrative business nowadays. People get attracted to it because it is one of the best ways to increase income and built a strong base for financial future. Some of the pros of multi-unit are:
- The more units there are the more income would come. Increase in cash flow could be gained if rent for each unit is increased.
- Obtaining a loan and buying a property is a long, arduous process. It’s very profitable business because only by acquiring one loan, a multi-unit property is bought. In the long term the collective rent of all these units could be easily used to pay the loan.
- With property comes the insurance, which is cumbersome. Owning 20 single units mean 20 insurance policies and heap of papers. But in multi-unit single insurance policy is required that is really easy to handle.
Buying a multi- family property is a tricky job. Mentioned below are a few tips to help.
Search for Property
Searching a good deal is sometimes about marketing or good relationships but that doesn’t mean to ignore the online listings. There are many different and useful blogs and sites that advertise property for sale. The key is to frequently search for the desired property on these sites. Extensive analysis is necessary to know that which geographical area is doing well in market.
Before searching for this type of property, make a search criteria that would help to move in a desired direction without wasting time. For example
- Muti-unit property with how many units?
- How much cash flow per month?
- Core or value added property?
After selecting a multi-unit property, it’s necessary to know that how much money could be spend. For that get prequalified for a mortgage. The prequalification will give information about how much money the lender is willing to lend.
Select a real Estate Agent
They are very important in buying and selling of properties. They have experience in the field and give valuable information about properties and neighborhoods that the general public have no idea about.
Shop for Multi-unit property
Now that the amount of money the lender will lend is in the knowledge, start looking for a multi-unit property within that range.
Make an Offer
Take as much as time to select a multi-unit property that fits the criteria shortlisted initially. Then with the real estate agent negotiate a fair offer compared to other such multiunit properties in the same neighborhood.
Calculate the estimated amount of money require for repairs and management of the property. For general public it’s difficult to do, so get in touch with a local contractor. They can give a very realistic estimate about repairs since they know the local prices. Since banks want proper documentation, use contractor quotes not your own guess about repairs.
Select a Lender
Since these units are sometimes costly, making difficult for many people to own them. Fortunately, there are many options for multiunit financing, that help to make a promising portfolio. While looking for lenders following tips could be of help:
- Always contact many lenders since it’s not unusual for a lender to pull out at the last moment.
- Credits should be in shape because the more score credit card has, the more likely to pay back on time ,increasing the chances of negotiation with lender for better rates
- For better know how about rates, compare rates from several mortgage lenders.
- Always choose realist options.
Finding Property Management Companies & Insurance Agents
To properly manage the newly bought multi-unit property it’s crucial to engage a management company. Make sure that it doesn’t strip off your rights on the property and doesn’t demand high fees.
It’s almost always good to hire the same company that is insuring the multiunit before it was sold. But that doesn’t mean not to look for other options that suit you.
Coordinate the Paperwork and Close the Deal
There is a lot of paperwork involved when buying a multiunit property like any other property. Coordinate it properly to avoid hassle. Many brokers claim that they can close the sale but only few can and it also takes time and patience. Finally, at closing, documents of loan and property are signed by the buyer. After the paperwork reach the lender, it takes few days to get the loan funded.
Last but not the least be interactive with the mortgage broker and the bank /lender. There should be no delay in the deal because of your absence.