Many real estate investors rent out single homes. There are many good reasons for this. But at Safe Harbor, we have decades of experience helping investors grow into the world of multi-family properties.
First, let’s look at why most people never make the jump from single homes to multi-family properties.
Some of the apprehension may be about issues that arise from the investor’s lack of knowledge and experience. Many investors are told to start from single-family homes but never consider expansion. Another obstacle is that many investors may be unaware of how to finance an investment properly. Another issue could arise from the thought of having to deal with management of multiple tenants.
But the bottom line is that many investors may not know how to make money through real estate on a larger scale than one home, one resident. How do you get to multi-family property investments?
Here is where to start:
Different Rental Markets
To become profitable, the first thing an investor needs to do is learn the different types of rental markets and find the one you think is best for your properties. Right now, there is a high demand for housing, so most markets you choose will do very well. This red-hot rental market isn’t always the situation, but it is right now.
Study economic trends to determine which areas are primed for multi-family properties. Again, with the housing shortage, suburbs will need apartment buildings as much as cities will. But the rule of thumb is that higher density cities will be better for multi-family properties.
Understand the different property classes.
A ‘Type A’ property is in a desired neighborhood and will require minor renovation to demand higher rents. This class of property might not be the best choice for the market you choose. Knowing the benefits and risks of each property class is essential.
Have the right analysis skills or the right partner
You will want to know what the returns will be the cash on cash return, cap rate, rental income, and other metrics. If you don’t possess the ability to do that analysis, Safe Harbor will be able to do that type of forecasting for you.
Understand how real estate loans effect your profit.
The higher the interest and payment you are responsible for will decrease profitability. With that being said, multi-family real estate loans are calculated based on the property’s earning potential. The interest rate will be higher, but will be safer for you, the investor.
Multi-family rental properties will require much more hands-on management. You may have the skillset and time to be a full-time property manager. But if you don’t, Safe Harbor could be a trusted partner. We possess the expertise, knowledge, and staff to help your business grow and become profitable.
We would love to talk to you further about the exciting potential that multi-family properties present.