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Multifamily real estate is a more lucrative investment than single-family homes. You have cash flow coming from multiple units rather than just one. Vacancies won’t affect you as much when you have more than one flow of income. Although this type of investment sounds overwhelming and expensive at first, anyone can get started. You may partner with other investors or obtain a loan. Purchasing your first multifamily investment property can be broken down into nine steps.

Knowing the maximum amount that you’re willing to invest in a multifamily property will reduce the stress involved in searching. You will know automatically which properties you’re not going to consider. Remember to take property management costs into consideration when you set a budget. Research how much property management companies charge for their services if you plan on hiring someone to manage the property. Other expenses to take into account are the down payment, closing, renovations, carrying cost and potential repair costs.

As the owner, you are responsible for handling certain repairs. Check your local and state law to know what you need to fix and how quickly. If you hire a property manager, then they manage repairs on your behalf. However, you should routinely check that they’re doing their job correctly. Some companies don’t maintain the properties well, which is a source of grief for tenants and could lead to legal problems. It could also cause repairs to become more expensive when they aren’t handled promptly.

You should have an understanding of the types of multifamily investment properties before shopping. The three general categories are residential, apartment complex and turnkey. Most people who are new to multifamily property investing start with residential. These properties are easier to purchase and manage than apartment complexes. Residential multifamily homes have separate entrances rather than one main entrance. You could buy a duplex, triplex or fourplex.

Periods of vacancy aren’t as significant for your cash flow with an apartment complex because there are more units. Managing an apartment complex, however, will cost more. You probably won’t be able to handle it on your own. Coast & Valley Properties, Inc. offers apartment property management in Salinas, Calif.

A turnkey property comes with tenants and a property manager. This could save you time and money on finding tenants.

Each type of multifamily investment property can be profitable. It depends on the specific real estate whether it’s a good buy. You’ll also want to consider your comfort level and budget.

Research various locations to find profitable areas to buy a multifamily investment property. Factors to check include employment rates, average vacancy rates, average rental rates and average price per rental unit.

Unless you have the full amount to buy a property, you’ll need to find a lender or an investment partner. The type of loan you take out depends on what type of real estate you’re buying. A hard money loan is usually best for properties that need renovations. Federal Housing Administration (FHA) loans could be easier to acquire for a residentials. You’ll want to choose lenders who have experience in investment homes as well. They are more likely to be comfortable with approving your loan. Obtain a pre-approval so that you can go searching for a multifamily home. You’ll need this to make an offer.

Buying an investment home isn’t the same as buying a personal home. You’ll need to work with a real estate agent who has experience in this area. They may be able to negotiate a better deal and find properties that you wouldn’t have found on your own.

While searching for an investment property in the locations that you’re interested in, pay attention to local factors. Homes that are close to schools and in low-crime neighborhoods are often best. Proximity to hospitals and stores are other factors that increase the likelihood of the real estate giving you a solid return on your investment.

You’ll want to estimate what your profit and loss would be on each rental property before making a decision. Look at both the short-term and long-term perspective. A home may be profitable in the short-term but not the long-term and vice versa.

When you calculate the expenses, make sure to include:
• Property management
• Ongoing repairs and maintenance
• Mortgage
• Taxes
• Utilities

Also, when you compare the P&L of properties, look at it from the perspective of your primary financial goal. Are you more concerned with monthly profit or property appreciation?

Let your real estate agent know how much you’d like to offer on the home. They can handle the negotiation process for you. Other information that should be included with the offer are any contingencies, the projected closing date and your pre-approval letter.

After the seller accepts your offer, the closing process starts. If they reject your offer, they may counter it with one of their own. You could also make another offer if they don’t counter. Obtaining the loan from your lender could take 30–45 days. In total, it could take you about 60–90 days to complete closing. Other tasks necessary to handle during this phase are inspecting the property, getting title insurance and making the down payment.

Making your first purchase of a multifamily investment property may take some time because of the research process. However, once you close your first deal, the next becomes easier and faster.