How to prepare your self before buying a multifamily home

Question

I am a young professional seeking to buy a multifamily home, preferably a 3 decker. I have never bough real estate before. Where can I start?

Thomas S. · Answer

Investing right depends entirely on the numbers. It is very simple in that you only purchase properties that meet your numbers. Once you learn the numbers anyone can do it. Keeping in mind you need a high level of risk tolerance and be willing to work hard.

Ryan Ball · Answer

Get to know your market, rental demand and the rents people pay  in different neighborhoods.  It is also good to understand all of the expenses involved in owning a multifamily.  It goes way beyond just being able to pay your mortgage: maintenance, taxes, vacancy, utilities, etc. all add up and can take what looks to be a great gross rent number to next to nothing.  The number of costs you have to account for and the crazy unplanned costs that come up was one of the biggest things I learned early on.

Gino Barbaro · Answer

@Andria Diaz

You are starting in the right place.  Listen to podcasts from BP, read as much as you can about multis, read about financing multis, choose where you want to begin your investing.

this is a fabulous site to connect with real estate brokers, mentors, and or coaches who can help you on your journey

Good Luck

Gino

Mike Hanneman · Answer

Why did you decide a tri-plex, I assume that's what a 3 decker means? If you are starting out and just want to ease into it, look for a duplex. Especially if you are going to live in one of the units. This way you only have one tenant to deal with yet you still get your rent covered too.

Lee L. · Answer

@Andria Diaz If you're ready to jump in, I'd suggest finding an agent that is familiar with doing multi-family deals. There are extra things you need to consider as part of due dilligence in multi-family deals. You can read up about these things here on BP. The Complete Guide to Buying and Selling Apartment Buildings by Steve Burgess is one of many good books that can give you a pretty good overview.

I'd also work with a loan officer who does a lot of multi-family deals. Not only do they know tricks to help you qualify for a multi-family deal (ie: you can qualify for a higher amount for MF compared to single family), they can help ensure a smoother process with respects to these loans.

Househacking is a great way to accumulate wealth and to add value to your property. Try to look for opportunities to live in and fix up the units.  Depending on the market, you can create a lot of value by FIXING UP the units. I would look for properties where a) the area is getting better b) the market supports the upgrades c) you can lock up access to the property -- ie: You can vacate the current tenants and get the rehab done d) the rehab budget and overall scope of the project makes sense financially.

Househacking has worked out for me pretty well. I just got done househacking the main house of a triplex and raised the rent from $1800 to $3195/m for the unit. I'm now looking to rinse and repeat for another property.

Steve Vaughan · Answer

Welcome to BP!  Start where anyone does - with education and figuring out a niche or strategy that matches your goals.

Lots of how-to guides under Education up top.  Listen to podcasts.  Turn off the TV and music. Read and listen.  Learn.  Save and budget. Master your favorite strategy, then learn another. Change your life!

Andria Diaz · Answer

Thank you guys.

I am not sure if a multifamily is the first investment I should make in real estate. It sounds good because the outcome maybe that I can rent high enough in two of the units that covers my entire mortgage cost. Were I can live in one of the units and not pay rent.  At the end of the day I am not sure if all the extra cost such as taxes, vacancy ect. will be worth it.

Thomas S. · Answer

Start by studying the state landlord tenant regulations. This is the business guide line you must operate under. If you do not know the rules you should not be starting a business.

While studying the rules join a local landlord or real estate organisation and speak with experienced landlords to learn how the regulations are interpreted and enforced in the area. Once you know all their is to know about the business you are about to enter you can then move forward with actually preparing to purchase a rental income property.

If you do not first know and understand the rules you are not ready to start the business. The proof of this is evident every day by landlords posting questions on here looking for answers to kindergarden level landlord tenant problems. The answer to almost every question involving tenants is read the regulations.

How to prepare your self before buying a multifamily home

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