Have people told you that being a landlord is awful or just too much work? I'm going to tell you 5 Reasons I think owning a multi family is a great idea!
I'm not a big time investor by any stretch but, I’ve learned enough over the past years to understand how the numbers work, the pros & cons of different types of properties, & what to look for when it comes to multi family properties. I got started by devouring as many books as I could on the topic & then through actually owning properties.
The first thing I love is that buying a multi family property as an owner-occupied investment can allow you to purchase in a neighborhood that you otherwise may be priced out of. For example, on the West End of Providence, single family properties are hard to find Unicorns & that means they're priced pretty high--simple supply & demand. In a single family I'd likely have a steep mortgage to pay on my own, but a property with rental income from a rental unit can allow me to either entirely cover the mortgage from the rental, or to have help covering the mortgage. That may give me an option to move to an area that I otherwise couldn't afford. In fact, that's how I was about to buy three properties on the West End of Providence.
I love that Multi family properties add income to reduce the burden of your monthly mortgage payments! Ideally, a three or four unit property that you live in will provide you with enough income to pay your entire monthly mortgage & escrows--if you're in a high rent area you may even net a little after your expenses! But a two unit property may provide you with more living space--many two unit properties in Rhode Island have one unit that is on one level & the second unit will have two floors of living space-- while the unit you decide to rent out may not cover the entire mortgage it should at least cut it down significantly.
On the other hand, If I’m buying an investment property that I’m not planning to live in, I’m looking for at least a net positive cash flow after all expenses of at least $1000 a month---some investors may expect a higher return but depending on the market & how much cash you have available to put down those numbers will change. You need to learn how to do the math to figure out how to meet your goals--I can help you with that! I’m more interested in specific numbers to set as a goal that I can help people who are getting started understand than cap rates & percentages--if you’re looking for that kind of talk go over to biggerpockets.com Super useful info over there by the way!
Another aspect I love is that you have an opportunity to provide safe & clean housing for people in your community. We all know that there are scumbag & absentee landlords who don’t care about their tenants much less the neighborhood. And believe it or not it can be really hard for people to find housing that is clean, safe, & affordable. You have an opportunity to invest in your community, make a smart financial decision, as well as make a difference in people’s lives.
Want to create your own micro-community? Buying a multi family property gives you an opportunity to buy a property with your friends or family members! Multi-generational living is gaining popularity & multi family properties suit these needs often much better than a single family property with in-law suite in the basement. Millennial buyers & their Boomer parents are pooling their resources to meet their needs while also keeping some individual space. Or close friends are forming business relationships to buy multi family properties together--especially three unit properties where one unit adds income to reduce expenses. The opportunities are only as limited as your creativity.
Number five on my list of things that I love about owning a multi family property is that you can leverage your property for more purchasing power to build financial stability & wealth. My first multi family property was a three unit that I lived in. The apartments were small but the math worked in my favor so that the total mortgage was paid for as well as my utilities. A year and a half later I was able to leverage that property in order to buy a two unit property---say what?
The only reason I was able to buy a second multi family was because I owned the first one. I was able to count the rental income from my current property towards my income plus the potential income of the property I was buying which gave me purchase power I wouldn’t otherwise have had given my meager income--this was when I worked for a non profit with a great mission but very low pay. My first property was obtained through a conventional loan and my second property, which I was going to move into, I was able to buy with a low down payment through an FHA loan. Between the two properties & the rental income from the units both of my mortgages, escrows, & property taxes were paid for. I was able to move from that tiny apartment into a property that was a lot nicer, had a lot more space for me & my kiddos--and it had a yard for the dog they wanted (a year later we got our second Husky!). Two years ago, I was able to purchase a third multi family with three units as an investment property. I had a plan & put those stepping stones in place.
So that's what I love: being able to buy in a neighborhood I'd be priced out of, having rental income to pay or offset my mortgage, having an opportunity to invest in my community & provide safe & affordable housing, creating an opportunity to invest in a property with my friends or family members, & creating an opportunity that builds wealth!
Stay tuned next week for part two: 5 Things I Hate about owning a multi family property! Spoiler alert--I don't really hate anything about it but there are definitely things I wish I had known when I started! Looking for a multi family to buy--let's get started! Reach out--I'm always here to help!
#multifamilyrealestateforsale #howtobuymultifamily #rirealtor #jesspowers
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