Can You Reasonably Invest in Multi-Family Units?

  If you have invested in the past in larger commercial units or if you are thinking about doing it for the first time, here are some helpful advice and tips when looking into investing.

  Single Family homes are just that. They house one family. Its not a duplex or apartment complex but a single home detached from any other.  Multi-family homes are the opposite. Apartment buildings, condos, or multi-plexes.

When you set out to invest in something that will be an income generator, there are three issues in mind to investing in real estate:

~ Security ~ Profit ~ Appriciation ~ 

  Some investors get involved in a rental property and are excited when they finally make that $50 in profit. They do this on a larger scale with bigger properties and more of them and it might make it worth their while.

   On the other hand, investing in more units at the same time yeilds a better return over all. When looking for financing for multi-family, make sure you start with the property. There is different financing for  1-4 family units then for 5+ units. Buying Daleville commercial real estate for under 5 units requires more down and usually a larger interest rate. Also these lender are a lot stricter when it comes to obtaining a loan.

   By bumping up how many units are in the commercial real estate you set yourself in a new lending bracket. You now can look into commercial financing. This is much more profitable and lends itself to easier financing and lower rates.

   But, are you thinking, well then that's just more to manage and I don't know if I can handle it? Put this in perspective. When you buy a complex that is at least 50-100 units, there are other manage possibilities involved. You will usually have a management staff to take care of the renting, billing, cleaning, and any operating costs involved. If you own a smaller place, you have to handle all the details and try to keep it rented just to break even.

  When looking into a property you will want to use the debt to service ratio instead of the standard debt to income ratio as with a single family home. This means for every $1000 you give out you need to take in 1.2% of that or $1200. This will help you figure out if the property you are looking into is worth it. To figure this out take the yearly debt operating income and divide it by the mortgage.

   If you have more questions about buying multi-family properties in the Daleville real estate area, contact our agents today. We can help work through all the numbers and figures and find the best property for your needs.