Multi – Family Rental character: Buying, Selling, Renting
Many of us, consider, whether purchasing a multi – family, rental character, is a good fit, in terms of being, a part of one’s investment strategy, and course of action. Like anything else, a wise consumer researches, and becomes familiar with the possible, pluses, and minuses, and whether it, is for them. It is important to understand, and estimate, the best, buying – opportunities, whether it should be sold, or if renting, is the best strategy. Should one buy a new character, or an existing one? With that in mind, this article will attempt to briefly consider, examine, and review, when, and, if, someone should buy, and whether it is the best time to sell, and/ or, if renting, might be the best strategy and approach.
1. Before you buy: There are many considerations, before you should buy, a multi – family, rental character. Are you going to live in one of the units, or rent the complete character? If you live there, your mortgage interest rate, will be lower, because it will be considered, an owner – occupied character, but, you also, will receive less revenue from rentals. Those doing so, often, look at this, as a way, to use rental revenues, to considerably, reduce one’s own, housing costs. If you are looking at this, as an investment, then, your mortgage interest rate, will be slightly higher, your down – payment, a little more, and you might have to justify the viability of the buy, based on rentals. A formula, I suggest, is receiving a 6% return, and a positive cash flow. This method, if the character costs $500,000, you must have a rent – roll of a net of $30,000 per year, after deducting real estate taxes, and owner/ landlord paid utilities, and basic maintenance. consequently, if taxes were $10,000 and expected utilities and basic maintenance were an additional $5,000, then you must collect, at the minimum $45,000 per year, in rents. Do this calculation, based on 10 months rents, in order to prepare for possible vacancies, etc. In addition, calculate the rents, and compare them, to your expenses, and proceed, only if this is a positive cash flow, and the 6% return, is achieved.
2. Selling: Is owning the best idea, for you? Are you prepared for the unanticipated expenses, and will you commit to putting aside, a save fund, for maintenance, repairs, and renovations? Is the real estate market, the right one, now, to get the best results, from a sale? Consider competition, the local market, mortgage interest rates, and how much, you feel, you need, from any transaction.
3. Renting: Ensure you do, a quality, legal, enforceable, screening course of action, and seek the finest tenants. There is no guarantee, but pricing correctly, to ensure, you are not the most expensive, often, creates the best opportunities. You must also, either, have the abilities, to do, lots of the repairs, etc, or have qualified service technicians, to prepare for the possibilities, and obstacles.
Like any investment, one should proceed, in the most prepared way, in order to make the best decisions, possible. It may be for you, or not, so, proceed, with your eyes, wide – open!