Things to Know About Investing in Multifamily Properties
As you probably know, for our business, Tarek and I almost exclusively focus on single-family houses. Residential real estate was our niche when we were agents, and it’s been the best market for us since switching to house flipping and teaching our Real Estate Elevated students. But that doesn’t mean that it’s the only profitable market out there. In fact, there’s a lot to be said for fixing and flipping multifamily properties.
If you’re going to go this route, though, you should know a few things first. Keep these things in mind and you could be in for some really lucrative investments.
Locations Are Limited, But They Still Matter
Whether you’re buying a duplex, a triplex, or a small apartment building, you’re not going to find a whole lot of multifamily properties in wealthy suburbs. You’re going to be limited to looking for properties in neighborhoods where people rent or buy apartments and condos and, in most cases, these aren’t areas with really high home sale values.
That doesn’t mean that location doesn’t matter. In general, if you want to fix and flip a multifamily building or complex, you’ll be looking in more urban areas where a lot of young renters want to live. Look at your markets based on how much the rental rates are. Why? Because you’re not going to be selling to the people moving into the units. You’re going to be selling to another investor—one who will be very interested in how quickly they can make back their investment in rental fees.
Rehabbing a Multifamily Rental
If you’re not sure where to start with designing your rehabs, don’t worry. Instead of trying to translate the designs you’d do for a single-family home into a multifamily building, take the time to tour some of the apartment buildings and/or townhouses in the area. Find out what kind of rent they charge and take a good look at how they’ve been renovated.
Just like a residential house flip, you don’t want to over-rehab the place. And you want to remember that you’re rehabbing rental spaces—when you have the option, go with materials that will withstand a lot of heavy traffic and wear and tear. Your buyers will see that you put quality work in, and they’ll note that the improvements you made will be likely to stand up to their tenants.
You Don’t Have to Stage Every Unit
When you have your open house, you’ll want to give your prospective buyers the option to wander through the whole building, but that doesn’t mean that you have to stage every unit. Instead, choose a model unit and have it staged to help your buyers see what kind of spaces they’ll be marketing to their prospective tenants.
Know How to Sell It
Remember, selling an investment property is a bit different than selling a residential property. You want the people who buy this building or complex to see that it’s a good investment for them. That means giving them an idea of what features they’ll be able to advertise to their tenants, like a pool, nearby amenities, schools, nightlife, etc. If you can remember this, you’ll have a much easier time selling this kind of property.
Multifamily properties can be really profitable, but they can also be a little bit tricky if you lose sight of what kinds of rehabs you need to do, who you’re selling to, and who’s going to be living there. Remember these things, and you’ll be set to create a gorgeous property that’ll sell quickly.
For more information about real estate investing, visit Real Estate Elevated's BiggerPockets blog.