The rule is the same for single-family or multifamily homes.
It’s as simple as this: buy distressed properties; bring up to code, refurbish and your potential ROI goes up.
If you’d like to test the water as a real estate investor, you might want to start with a single-family home. However, dealing in multifamily homes—duplexes, triplexes, or quadraplexes- has the potential to be a lucrative investment strategy.
What’s best for you? To determine, ask yourself a few questions before getting started. Is there a specific location you’re going to look in for investments? Are you going to make a few repairs and then flip or keep and manage on your own? It’s important to think ahead before you invest.
Repair, Refurbish and Flip
Just as with single-family homes, you’ll find multifamily dwellings that have been abandoned or neglected. Some require a little TLC. Others are so badly deteriorated they are classified as condemned.
Depending on your plan, one profile may be more in line with your goals than another. Multifamily properties require a larger investment of time and money. You’ll want to be really sure the property you choose is right for you before you sign. Buying a property without properly assessing the viability of your purchase reduces the probability of a successful investment. Let’s put it this way. It’s a lot easier to think before you buy than it is to try to unload a bad investment.
It’s a lot easier to think before you buy than it is to try to unload a bad investment.
Purchase and Manage
Does the idea of collecting residual income on the first of every month sound good? Yeah, it would be nice if that were all you’d have to do as a landlord.
First of all, count your blessings if your tenants always pay on the 1st. There is usually a grace period of a few days. Some tenants push the limit and wait until the 4th or 5th to pay.
Even if your tenants pay in cash, you’re responsible for paying taxes on rental income. There are, however, certain tax deductible expenses, such as repainting.
If you’re not handy around the house, you may want to reconsider and sell. As a landlord, you’re responsible for making repairs. This goes anywhere from unstopping a drain to buying and replacing a water heater.
Dealing in multifamily properties gives you several options. It’s a good investment strategy as long as you weigh them. Choose wisely and you could be on your way to the wealth you’ve been hoping for.