Written by: Laurie Abner
If you’re in the market for a great rental property, a multi-family home should be one of the best options to consider. Compared to single occupancy units, multi-family homes typically have longer leases, higher rent, and are occupied by families (with one or more earners). But, on the flip side, it will require a higher level of investment and maintenance. In this article by White & Associates, we’ll explore the steps one can take to find the best multifamily unit and become a successful landlord.
Create a Budget
Purchasing a second property is only going to increase expenses, at least in the short term. In addition to managing your current home, you’ll now need to spend towards the upkeep of the second one as well. Hence, sound financial planning is integral to earning a good return on investment. Buying a multifamily home will include the following costs:
- At least a 25% down payment
- Closing costs
- Repairs and improvements (if needed)
- Application fees
Additionally, you need to factor in the long-term costs of paying off a mortgage. Given the consistent changes in fiscal policy by the FED, the safe option will be to choose a fixed-interest mortgage. While there is a chance that rates will reduce in the coming year, they can go up as well, according to Reuters. A fixed-interest mortgage safeguards you from these fluctuations and makes it easier to create a repayment plan.
Work with a Licensed Realtor
Real estate websites are a great place to start the house-hunting process. Within a few clicks, you’ll be given a list of properties that fit your needs or budget, space, location, etc. However, buying the right multi-family home goes deeper than finding a rental property.
Not all apartment complexes or housing communities allow owners to rent properties. Others may impose a charge towards rentals that can reduce revenue coming into your pockets.
Navigating these fine details singlehandedly is understandably difficult. But don’t fret, as working with a licensed realtor will make the process significantly easier. Realtors are experts in finding the best properties, managing paperwork, and ensuring everything is up to your expectations. Here’s what you should do during your first visit with a realtor:
- Bring a shortlist of expectations such as two-story home, backyard, 3+ bedrooms, etc.
- Discuss the best locations to buy a multifamily property, which can include Los Angeles (CA), Dallas (TX), and Boise (ID).
- Gain clarity on what the total cost of buying a home will be (including closing costs, commissions, appraisal fees, etc.). Use this information to modify your budget.
Additionally, rental laws differ greatly between states. Having a realtor by your side will ensure contracts are drawn in accordance to local, state, and federal level requirements and include clauses that protect your best interests.
Purchase Multi-Family Home Warranty and Home Insurance
As a homeowner, you already understand the importance of having home insurance. Whether you’ve owned a property for a few years or across decades, it’s safe to say that you’ve made at least one insurance claim that has saved you hundreds, if not thousands, of dollars.
Having homeowner’s insurance for a rental property is important for protecting your finances. But, purchasing a home warranty is equally important. This is a contract you enter into with a home warranty company that agrees to repair or replace home systems and appliances when needed. A home warranty covers areas of the home that the home insurance does not, such as your refrigerator, HVAC unit, and more. Given that tenants will be the ones using these appliances, having a home warranty will safeguard you from hefty repairs in case of damage or theft.
Here is a resource to help you make up your mind if you’re still on the fence regarding whether a home warranty is required.
Buying a multi-family home is a great way to develop a reliable secondary stream of income. Working with a realtor will no doubt make the process easy and quick. Additionally, remember to purchase home insurance and home warranty policies to safeguard yourself from unforeseen circumstances.
Contact Stephen White
Looking to buy or sell a multi-family property? Get professional real estate guidance from expert realtor Stephen White. It doesn’t matter if you’re looking to buy, sell, or invest in real estate in Los Angeles, California, or across the US, Stephen White can help you with all your real estate needs.
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