10 Tips to Consider for Your First Multifamily Investment Property
by Joe Killinger
There are a lot of considerations to take in before purchasing your first multifamily investment property. We’ve compiled a quick list to help you traverse the road to a successful investment.
- Know the return you would like to achieve and the amount of risk you are willing to take on. Generally, with investments the greater the risk, the better the return.
- Do thorough due diligence on the area, the property and the community, hire an experienced inspector to check out the entire property. You will want to know about upcoming changes in the neighborhood/community, not just what your immediate neighbors are like.
- Prepare to run the property just as it’s a business, get the right property management software (Rent Manager or Yardi to name a couple).
- Be very careful when hiring your staff, run employment background checks on everyone and check every reference. When hiring your manager be sure you hire someone that knows all the federal, state and local housing laws and are well versed in handling emergency situations
- Know the market rents for your property, have your manager do a market survey right away and every six months. If your rent is too expensive the unit will sit vacant and if it’s too cheap you are leaving money on the table.
- Finding great, responsible residents can be a daunting task, I recommend starting with talking to your current residents and offer them a small discount on their rent for referring someone. There are many websites that you can post your vacant units on, Zillow, Apartments.com and even occasionally Craigslist. When posting your listing create a complete picture of what the unit is like and include good photos if you can. The more complete the explanation the better and can save you time on wasted calls/emails.
- Be sure the potential resident fills out the application form thoroughly, Run credit and background checks (theRRD.com) as well as check all references for their employment and last residences.
- Legally you don’t need one, but for best business practices you MUST have a written rental agreement, be sure the entire contract has been filled out and executed by both parties.
- Create community guidelines for your residents and be sure all residents are aware of these guidelines i.e.: pool closes at 9pm, laundry room closes at 10pm or the time frame that you require to enter their unit, be sure to always enforce these rules for everyone.
- Rent collection needs to be consistent and every resident needs to know exactly how to get you their rent, drop off at the office, send it to the main office, or online. Be sure everyone knows when their payment is late and how much their late fee is, stick to guidelines!
These 10 items should get you on a good start to owning and managing your investment property the best way possible. Following these guidelines can keep you from making the mistakes many of us have made as we learned the ins and outs of real estate investing. Feel free to reach out with further questions: 214-520-7577 or [email protected].