Are you interested in beginning your multifamily portfolio? If you are new to property investments, getting started can feel overwhelming. That’s why we want to help you start with the basics of multifamily investing: why, what, and how.

 

What is a multifamily property? 

 

A multifamily property is any property that includes more than one housing unit.

The most common types of multifamily properties include: 

• Duplex, Triplex, Quadplex

• Apartment Complex

• Condos

While there are several different types, there are also classifications for these properties. When you are beginning to purchase multifamily properties, consider what class you want to invest in and whether or not you wish to diversify class types within your portfolio or stick to one.

 

 

How do you know what class to purchase? Many follow-up questions have to be asked to answer this since every investor is different. For example, how much are you willing to spend on a property? How much continual maintenance are you willing to do for a property? But overall, as long as the property provides adequate cash flow for you, you can't go wrong with a classification. 

 

Why should you invest in multifamily properties? 

 

While there are many benefits to owning multifamily units, here are our top four:

 

 

Cashflow: The largest benefit to multifamily properties is the cash flow. With multiple renters per property, your income becomes greater and more reliable. If you have a vacancy in one unit, you will still have cash flow from other units. 

Grow your Portfolio: When it comes to your investment portfolio, purchasing a duplex or quadplex is a much faster and more efficient way to grow than buying four single-family homes one at a time. Smaller multifamily properties (duplex, triplex, quadplex) are also a great first step toward an apartment purchase. 

Demand is Up: In 2021, we sold over $21 million in multifamily properties from multi-million dollar apartment complexes to quadplexes and duplexes. Not only is the demand high for rentals, but also renters. According to the NAR, demand for multifamily apartments is continually increasing, and vacancy rates are decreasing. 

Easier to Finance: Often, it is easier to finance a multifamily property than a single-family home. Since there are multiple tenants, income is more reliable and therefore less of a risk for banks.

 

How do you get started? 

 

While there is no single right way to start growing your multifamily portfolio, we did compile a few suggestions to help you start. However, nothing beats experience. As Cody Ayres, financial advisor and investor, suggested, “if you have never owned a rental, help someone that owns some property or shadow them." Simply put, start at a level you are comfortable with, whether you help someone else or purchase a single duplex or rental.

1. Set your budget

   • How much financing will you qualify for?

   • What classification are you looking for?

2. Find a real estate advisor to help guide you

   • Subscribe to email lists to see upcoming auctions and listings

3. Once you find a property you are interested in: 

   • Calculate your approximate cash flow for the property: how much money is actually going into your wallet? Is the cash flow worth the investment?

   • Determine the cap rate: This measures how quickly you will see a return on your investment; a good cap rate in today’s market is within 5-10% depending on the class of the property you pick.

 

Are you ready to purchase a multifamily property? 

 

If you are ready to start searching for a multifamily property, contact one of our real estate advisors today or view our upcoming auctions and listings for all types of investment properties.