Choosing a Multi-Family Investment Property

A multiplex investment property is one that has more than one rental unit. It includes duplexes, triplexes, and fourplexes. They can be great investments, but the process can feel daunting if you are new to multifamily properties.

This post will cover some tips to help investors looking to buy multiplexes so they can learn how to choose among multiplex properties.

Tips for Choosing a Multi-Family Property

Find the Right Location

Location is a crucial factor in all real estate investments. You may already have a specific city or region where you want to invest. However, you should narrow it down to the best neighborhoods for multiplex investing. Areas with high growth can be good, but it can also help to consider other factors like the schools, walkability ratings, local amenities, rental demand, and more.

Number of Units

Investors need to consider which types of multifamily properties they want. Properties with more tenants have more upside. However, having more tenants will also require more work. Weigh your ability to handle more tenants against the increased earning potential. Hiring a property manager is something to consider.

The Building

There is much to consider about the building beyond the number of units. For example, consider the age and condition of the property. Look at the number of bedrooms and bathrooms per unit. Consider the outdoor spaces and the requirements for landscaping. Some investors want properties they can renovate to add value. Others might want a building that is ready for tenants.

Analyze the Potential

At the end of the day, these properties need to function as a business. That means you need to analyze their ability to provide a return on your investment. Calculate the total revenue you expect to make and compare that to expenses. You should also calculate the cap rate and compare it to other properties. The property is not a good investment if the numbers don’t add up.

Finances

Your finances are also an essential part of multiplex investing. The biggest question is how you plan to finance the purchase. Consider how much you can spend and whether you already have financing. You must also understand the requirements of financing duplexes and other multiplex properties. Investors should also ensure sufficient cash reserves to pay the debt until the property generates income.