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Property Investments

6 Tips for Building a Multifamily Portfolio

When looking to diversify your real estate investments, one of the ways to do so is by creating a multifamily portfolio. Here are 6 tips to diversify your portfolio successfully.

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There are many different investment options for investors looking to diversify their real estate portfolio. While they all can bring some rewards, the real winner among many seasoned investors seems to be multi-family rental properties.

Whether you are new to investing or are just looking to invest in something new, here are 6 tips for building a multifamily portfolio.

Tip 1: Location, Location, Location

Choosing where you invest in your multi-family rental is just as important – if not more so – than the rental itself. You may want to consider something that is easily accessible to important destinations, such as grocery stores, dining and shopping, medical services, etc. Regardless of who your tenants are, having things handy and close by can make a positive impact on their decision to apply as tenants.

Pay attention to the rental markets, too, so that you are not investing in an area that doesn’t have a very bright future.

Tip 2: Look For Smaller Multifamily Properties

You are an investor and know what you can and cannot handle. But, if you are new to the world of multi-family properties, you may want to consider starting small. Choose properties like a duplex, or quadruplex first. Or maybe even a small building of 8 or 10 units. This is much more manageable to start with and gives you a chance to get your feet wet, so to speak. Diving headfirst into a 150-unit high rise could prove to be too much for your multifamily portfolio.

Tip 3: Consider the Condition of the Property

Not all rental properties are created equal. There is a lot to go wrong with multi-family properties, such as units that may have been subjected to different levels of tenant care, a lot of plumbing, as well as potential maintenance and repair costs.

Be sure to thoroughly assess the property before jumping in or else you may find yourself putting more money into the property than you intended.

Tip 4: Perform a Sensitivity Analysis

A sensitivity analysis is a sort of what-if type of assessment. You look at all the variables that will impact whether or not this is a wise investment. And you want to add the properties to your multifamily portfolio that look as though they will have the least amount of negative impact on your return. For instance, consider looking at the answers to questions such as these:

  • How much rent do I need to charge to make a profit? How long can I go on rent and still make a profit?
  • What will the outlook on the property be if the market goes down? Or, up?
  • What vacancy rate can I have before I begin to lose money?

You can answer these or choose some of your own that matter most to you and your investment strategy.

Tip 5: Be Prepared for Anything

If you expand into a multifamily portfolio, then you are going to need to be prepared for anything. You have many chances for repairs and maintenance needs. You also have multiple units to fill so you may carry a higher vacancy rate for a while. Things like this happen – and they tend to happen more often when you have larger properties. So as you build your multifamily portfolio, by preparing yourself, it will be less of a shock when it does happen.

Tip 6: Hire a Property Management Team

When you invest in multi-family properties, you want to take steps to keep your costs down and your units occupied. You can do that with a property management team. They will work to provide routine maintenance to reduce the incidence of emergency repairs as well as thorough tenant screening services so that you always have high-quality and even long-term tenants.

One of the biggest mistakes investors make is trying to do everything on their own. Handling one or two single-family rental properties is one thing. But handling a multi-family property is an entirely different situation. By choosing a property management team, you free up yourself to continue searching for investment opportunities while you bring in the money from your multi-family property.

Why the Interest in Multifamily Rentals?

Many investors prefer single-family homes for filling their rental portfolios, but that doesn’t mean multi-family housing doesn’t have its perks. More and more investors are looking to diversify their portfolios by adding a multi-family rental property or two. And, then, of course, some have left the SFH in the dust and have solely built multifamily portfolios. So, why the interest? What are the perks?

For starters, these rentals offer a great opportunity to grow and increase your profit. Cash flow is one of the most common reasons investors turn to multi-family rentals. Not only do they typically provide great returns, but you also have the chance to increase rent annually, say 3% – 5%.

They also provide a great source of passive income. Granted, not if you do all the work yourself. But, if you hire a property manager to handle your property for you, you can collect the money while someone else handles every aspect of managing your rental. Plus, you don’t have to worry about taking out multiple loans to purchase multiple properties. This gives you multiple rentals – but only one loan.

Final Thought

Truthfully, we could keep going on and on about the perks of a multifamily portfolio, though it would be wrong to not mention that there are potential downfalls, too, such as the fact that these properties are often much more expensive than single-family rentals and they require more maintenance. However, as we discussed, with an experienced, successful Phoenix property manager like Real Property Management Evolve, this wouldn’t be an issue.

If you are interested in building a multifamily portfolio and believe that it is the right investment strategy for you, then follow these tips – start small, pay attention to the location and the condition of the property, go through the what-ifs, and hire a property manager. In doing so, you may just find multi-family properties to be a rewarding decision for your portfolio.

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Property Investments

5 Steps to Scale from a Single Family Home to Multifamily Properties

Scaling from a single family home to multifamily properties can be a great way to diversify your portfolio. Here are 5 steps to get started. 

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When it comes to finding new ways to mix up their portfolio, investors may find that taking that next step toward multifamily properties feels like the natural way to go. There are many reasons why this may be the case. For instance, just think of how much easier it could be to manage one property with 10 units rather than ten single family homes. In other words, greater efficiency.

Although it is important to stick to what works for you as an investor, for those who are considering scaling from single family homes to multifamily properties, here are 5 steps to do so.

1. Choose the Right Area

Don’t just jump into investing in multifamily real estate in the area where you live because it is convenient. Rather, focus on areas that have growing markets. You need to make sure that when you purchase the building, that you will have no trouble finding tenants willing to pay a decent rent. Besides, nobody is going to want to live in an area where the job market isn’t doing well or where there are no easily accessible conveniences, such as grocery stores, gas stations, and so on.

Take your time to choose the right neighborhood. Knowing your budget, too, can help narrow down certain areas.

2. Work With a Team

Finding, buying, and managing a multifamily property is not something that can easily be done alone. Therefore, it is very beneficial if you work with a team. A real estate agent can help you find the right property, an attorney can help make sure everything is lined up legally with the purchase, and a contractor can help you do any necessary repairs once you purchase it.

Then, unless you plan on managing the property yourself, you will want to have a property manager on your side. This person or team will help to handle the day-to-day responsibilities of maintaining rental property. Everything from marketing the property and finding tenants to handling repairs and emergencies as well as rent collection and so much more.

Investing in a single family home is one thing. But multifamily properties are on a much bigger scale and having a multi family property management team in place will ensure that you can keep doing what you do best – investing – while everything else – including the management of your rental properties – are handled appropriately.

3. Develop Your Strategy

Any investor knows that there are many things that must be considered before you purchase properties. You want to consider a few key things, such as:

  • How large of a multifamily property you are interested
  • Whether or not you would consider commercial properties
  • What size of a down payment you will have available
  • What type of ROI you are looking to achieve
  • How long you intend to hold the property

Investment strategies should always include the bigger pictures and should contain all the factors regarding your personal investments.

Before you move into a new type of investment, whether that is a single family home, or multifamily properties, have a fully developed strategy.

4. Don’t Forget to Look at the Taxes

Depending on the area you are investing in, the taxes could be very high. They usually are based on the value of the property. But the manner in which it is assessed and the tax rate can vary from place to place.

You don’t want to invest in a property without taking the taxes into consideration – especially a multifamily property. These are going to likely be valued at a much higher amount than a single family home. That means the taxes are going to be greater. You need to be able to ensure you can cover the cost of the taxes annually or else you may find yourself in a bit of hot water. It is important to keep in mind that taxes don’t usually tend to drop, but may very well increase. So keep this in mind as you are considering scaling your portfolio.

5. Weigh Out the Cost vs. the Benefit

Finally, you want to be sure you perform your due diligence, carefully weighing out the cost vs. the benefit. Taking on a big investment such as a multifamily property can be a great undertaking as there is a lot involved. It can easily soak up your finances, too, if you are not careful.

There will be upgrades and repairs that need to be done. You want to create a property that will be enjoyed and sought after by renters, but you don’t necessarily want to get yourself in a position where you have invested too much in the building, as well as the repairs and upgrades, that you end up upside down in your investment.

Take time to review the financials. Pay attention to your interest rate. Assess your cash flow vs. appreciation. If it doesn’t appear that the multifamily property will lead you on a path to growth, then don’t move forward with it and continue searching for the right property.

Scaling Investments from a Single Family Home

There are so many steps that go into moving your focus from a single family home to multifamily buildings. But these five are important – you need to focus on the financials and growth opportunities of the property. Of course, though, it is also important to focus on things like having preparations in place, such as ideas for creating value and a property management team like Phoenix’s Real Property Management Evolve to make the outcome positive.

Are multifamily properties right for you? If so, contact our team at Real Property Management Evolve today.

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Property Investments

3 Tips to Increase Passive Income on Your Multifamily Property

As an investor, owning and renting multifamily property can be a great way to diversify your portfolio and bring in passive income. Here are three tips to help you succeed.

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Passive income is income that is earned without having to actively work at it. It doesn’t require a lot of your attention or time, yet it is still earned income. Focusing on investments that allow you to continue earning money with passive income can be a fantastic way to earn money now and in the future.

Once such type of investment is multifamily property. Though, your actual passive income will vary based on how much involvement you have in the property.

Looking to increase your passive income on your multifamily property? You need to make it more desirable. Let’s take a look at 3 tips to increase passive income on multifamily real estate.

 

1. Increase the Value of Your Multifamily Property

In order for you to make money on rental property, you need to have renters. And because there are often so many options on the market, showing there is great value in renting your property may entice the potential tenant to lean toward your rental.

It is important to mention that the more value you add, it is easier to keep your rentals priced closer to the higher end of the market range. Renters will be able to justify the extra money each month due to the great value and amenities they are receiving from the property.

So, how can you increase the value of your multifamily property?

— Add Storage Space 

Storage space is something that many people are always looking for. Especially renters. Moving from one location to another – especially smaller apartments – means having stuff that doesn’t necessarily fit. Rather than get rid of it, millions of people throughout the country spend between $50.00 to $150.00 each month for storage.

Does your multifamily property have additional space to build storage? Storage facilities are incredibly cheap to build and can add a lot of value. Plus, not only can you entice renters with convenient on-site storage, but you can charge them a monthly fee for the storage as well. It could be a great investment. And a great way to increase your passive income.

— Add On-Site Laundry Facilities

Many,  but not all, multi-family properties don’t come with a washer or dryer in the unit – or even a hookup. This means having to carry dirty laundry to the nearest laundromat. It can be seen as a great inconvenience. If possible, add an on-site laundry facility. The value of this investment is immediate and can add to your passive income, as well. Instead of your tenants going to other places in the community to do laundry, they can conveniently do it where they live and you can earn the money they paid to wash and dry. In addition, a lot of companies who lease the washer and dryers will give a signing incentive up to $14,000 when you lease their equipment!

— Be Pet Friendly

People love their animals – and they want to be able to take them wherever they move. For many, not allowing pets can be a deal-breaker. If you’d like to increase the value of your property and increase your ability to earn passive income, then deciding to be pet friendly means allowing your tenants to have pets. In addition, building a dog run on your multi family can help contain the pet mess while providing an extra amenity to your tenants. Remember — you can charge pet rent on top of the normal monthly rent.

-It’s a win-win for both parties.

 

2. Add Safety Features to Your Multifamily Property

People want to live somewhere safe. They want to know that when they are home or on the property that they are safe and secure. Taking steps to increase the safety of the property means adding additional value in it — and potential tenants will see it. In addition, you reduce the incidence of any vandalism and theft on the property so that your replacement, repair, and insurance costs remain low. All of this ties into your income – and leaves you with an increased passive income.

Here are a few ideas for increasing the safety features:

  • Make sure you have adequate lighting throughout the property – and add more if necessary.
  • Keep bushes trimmed to minimize hiding spaces for intruders.
  • Consider adding security access points, whether through a gate, a door with a key code, etc. This will depend on the setup of your property.
  • Avoid glass doors. These are easy to break — and costly to replace.
  • Use top-notch locks on doors and windows to make accessing the property harder for criminals.
  • Make use of security cameras on common areas of the property. Put up signs advising of such – and let your residents know, too.

 

3. Hire a Property Management Team

Hiring a property management team to handle your property for you is one of the best steps you can take in increasing your passive income. Why? Well, there is a lot that comes with managing a rental property. When you have a multifamily rental property,  you are multiplying that work times the number of units you have. This can significantly increase the volume of your work. From finding new tenants, rent collection, repairs and maintenance, and so much more — you are actively involved in earning that income. Being a landlord is much like having a job. And with many units, it can be a very demanding job.

The idea with passive income is to earn money without having to put in the effort. This is where a multifamily property management companies come in. See, the property management team will put in the work to get the property rented, maintained, handle repairs, rent collection, all the marketing and paperwork — every aspect of the rental process. While you sit back and earn the income. That is what passive income is all about — and how a property manager can help.

 

Conclusion

Being a landlord can be a lot of work – and surely reduces the amount of passive income you receive. If you are ready to increase this income and be able to focus your attention on other investments rather than managing the day-to-day of your multifamily rental property, then you need to make your property more valuable, keep it safe, and hire a property manager.

And, since we are on the topic – you can’t just hire any property manager. Be sure that it is the best one in your area, such as Real Property Management Evolve in the Phoenix area. This breeds confidence and increased passive income.

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Property Investments

How to Buy a Multifamily Property: 5 Pros of Multifamily Investing

Multifamily investing is a great way to diversify your portfolio and increase passive income, here is how to buy a multifamily property, and the benefits of doing so.

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People are always looking to invest in rental property, but those who have never taken the leap often don’t know where to start. After all, there are so many options, such as single-family homes, multifamily properties, commercial office space, retail space, hotels, and more.

Where do you start?

Of all the options, multifamily properties tend to be one of the easiest, most straightforward methods of investing in rental property.

 

What is a Multifamily Property?

In short, a multifamily property is one that has more than one unit.

When referring to multifamily properties, it is not uncommon to think of massive high rises or large apartment complexes. After all, these are places where you have many families residing within one building. But multifamily homes can come in all sizes – including a two-family duplex. Tri-plexes and four-plexes are also multifamily properties, housing three and four families.

Smaller multifamily properties are still considered residential property. But, when there are five or more units, it is often referred to as a commercial real estate.

 

5 Pros of Multifamily Investing

Some investors believe that multifamily properties are the way to go. You buy one building and have multiple tenants – it must be a great investment, right? As long as you are making a well-strategized purchase, you will find that there are many benefits to multifamily investing. These include:

1. Create passive income.

As with every rental investment, passive income becomes a great way to bring in money without having to give it much time and attention. This is even more true when you hire a property manager to handle your properties.

2. Increase cash flow.

When you have multiple properties, you have multiple incomes coming in on one property and it can generate an increase in cash flow for you. When you are ready, you can even take this increase in cash flow and invest it in another property.

3. It’s a low-risk investment.

If you have money that you need to invest, but you want to do so safely, then the multifamily investing is a great option. People will always need a place to live.

Even if they are forced to sell their home and move into something smaller, they need a roof over their heads. So no matter how good or bad the economy gets, there is always a good chance of demand.

4. There are many tax advantages.

One thing that sets multifamily rental properties aside from others is that they come with many tax advantages that others don’t. This primarily comes down to depreciation offsets.

5. You only need one loan.

When you buy multiple properties, you will have multiple different loans which can be tedious in tracking and managing over time. However, with multifamily investing, you will only have to worry about one loan on the property of multiple units. When you have a lot on your plate, this can simplify things a bit.

 

How to Buy a Multifamily Property

Once you get your mind set on purchasing a multifamily rental property, you are going to need to know how to do it. You could move in the traditional sense and take out a mortgage. This, of course, means going through various applications and providing the right documentation to get approved. If you are intending to reside in one of the units, you may even qualify for an FHA or VA loan. Be sure to check with your bank or lender to determine your options.

Private money mortgages are another option. If you know a financial backer who isn’t too big into the details of investing but is willing to give you the money to invest, this is another option. Sometimes money may even come from friends or family members who want to act as silent partners in your multifamily investing adventures.

If your investment funds are too high, you can even consider buying cheaper properties using the BRRRR method and rehab them a bit. You may be surprised at how much money you could save — if you have the time and skill to renovate.

Multifamily property investors often have a lot of different strategies they use for determining the best properties or making the best use of funds. Expand your network and learn from those who are already doing it.

 

Utilize a Property Manager for your Multifamily Properties

While there are many reasons to begin multifamily investing, there is one downfall that we have not discussed – and that’s how difficult they are to manage. For investors who aren’t experts at managing more than a rental property or two, having a multifamily unit with multiple tenants – and all the issues that may arise – can be overwhelming and frustrating.

This is where multifamily property management comes in. You can’t let the trials of handling multiple tenants deter you from making a sound investment in a piece of multifamily real estate. Instead, you need to make wise decisions to invest and then delegate the work.

Experienced property managers are able to handle your multifamily property with ease, freeing you up immensely. And hiring one just makes the most financial sense.

A property manager will handle:

  • Marketing your property
  • Tenant screening
  • Showing the property
  • Lease signings
  • Maintenance and repair
  • Walkthroughs and inspections
  • Evictions
  • Rent collection and distribution

And so much more. They understand everything that it takes to successfully manage rental properties – and that’s what they do. At Real Property Management Evolve – the best property management team in Phoenix – we know handling a multifamily property can be overwhelming for the most seasoned investors. That’s why we manage your property so that you don’t have to.

Buying and renting a multifamily property is a great choice to make as an investor – especially because the benefits of doing so are plentiful. But once you do, just know that managing multiple units is much more difficult than you may expect. Reach out to an experienced property manager – such as Real Property Management Evolve – to handle the property for you. It pays to have the experts on your side.

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Property Management Tips

6 Things to Know About Managing Your Multifamily Real Estate

Managing multifamily real estate is a great way to generate passive income as an investor. Before you begin, here are 6 things to consider.

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Most landlords and investors get their start with single-family homes. Learning to invest your money into rental properties or in those that will allow you to flip can be a great way to earn money investing – as well as building your portfolio.

While these present great opportunities, they are just a small portion of what is available for real estate investors. There comes a time when nearly all investors wonder whether or not multifamily real estate should be the next move.

Before you decide to jump head first into multifamily real estate as your next rental property, there are a few things you should consider.

 

1. Get Your Feet Wet Before You Dive In

You may have the process of managing your single-family home rental properties down to a science. Maybe you have been doing it for years or maybe you just really thought out the process before you went any further. Here’s the thing – it doesn’t matter how well you manage your properties because multifamily property management is entirely different.

Handling multifamily real estate can be a learning process. Buying too big of a property or too many multifamily properties in a short period of time can be overwhelming and stressful. And this could end up costing you big time.

In general, the most successful real estate investors start small.

 

2. Set Rules for Your Multifamily Real Estate 

In any building where you have multiple families living together, you are going to find yourself dealing with some issues. This can result from just about anything. It could be a noisy, disruptive neighbor. A family that has a pet who invades the space of other residents. Parking issues or complaints. And those are just a couple of examples.

Each family is different – and what they expect out of a living space will vary, one from the next. So, to help everyone get along a little better — and help you keep your sanity — you need to have some guidelines and rules in place for the community as a whole.

These rules should be made clear at the lease signing – and should, for best results, be listed within the lease. Making the expectations clear for all who reside at the property can lead to a better experience for everyone. Though, keep in mind, no matter how clear you are about the community guidelines, you may always have a tenant that pushes the limit and there will always be that tenant who wants to let you know about it.

 

3. Get to Know Your Tenants

As any landlord knows, you want to develop a healthy relationship with your tenants. This is true for multifamily properties, too. Not only does this make your tenants more comfortable coming to you with issues or concerns, but it also helps your tenants to have greater respect for each other.

Why does this matter?

Well, when your tenants are happy with where they are living (and you are happy with them), you will notice that your property vacancy and tenant turnover rates decrease greatly.

 

4. Make Your Multifamily Property More Enticing

There are those multifamily properties that are cold, dreary and just another stopping ground for renters until they find a more permanent location to call home. And then there are those properties that allow tenants to feel at home. They are welcoming, offer amenities, and feel cozy. You know, the type of places that just entice people to stay a little longer.

When it comes to managing multifamily real estate, you need to make sure your properties are the type that make tenants want to stay. You can do this by offering conveniences, such as offering more than one parking spot, ceiling fans throughout the residence, a dishwasher and garbage disposal, sectioned off dog parks, upgraded club house amenities, or even just a well-cared for landscape or playground for the kids.

 

5. Make Your Multifamily Real Estate Energy Efficient

It can be expensive to maintain larger properties – especially if you have a large amount of vacancies. Water, lighting, and other utilities can creep up on you if you are footing the bill. By being proactive and including appliances with energy-star, LED light bulbs, low-flow toilets, and the like, you are going to save yourself money down the road. In addition, these things are also able to grab the attention of potential tenants which is always a bonus.

 

6. Hire a Property Manager

While the ROI and such that you receive from investing in multifamily real estate can be great for you financially, the headache and weight of managing these properties can make you want to run in the other direction.

By hiring a property manager, you get the financial benefits that can come with investing in multifamily real estate without the frustrations that come with managing it. In other words, you are leaving the managing in the hands of those who do it professionally while you get to focus on what you do best – investing.

Property managers handle everything necessary for managing multifamily properties, such as:

  • Filling vacancies with high-quality, thoroughly screened tenants
  • Maintenance and repairs, both routine and emergency
  • Inspections, walk throughs
  • Rent collection
  • Property management marketing/advertising
  • Maintaining records and documentation for the property
  • Monthly and annual reporting

If you are a landlord or real estate investor who is considering a multifamily property, know that there is a difference and have a plan. Will you manage the property yourself? Have you assessed various management systems to handle it successfully? Are you willing to deal with the repairs and maintenance on larger properties? Do you have the manpower to get the job done?

There is so much to consider when it comes to managing multifamily properties. Hiring an experienced property manager is the best way to make sure you enter this new phase of investing in the most successful way imaginable.

As a top-ranked property manager in Phoenix area, Real Property Management Evolve has developed streamlined, efficient methods for handling small multifamily real estate with ease. There comes a time in every investor or landlord’s life when it just makes more financial sense to hand over the reins – and this usually always comes with multifamily properties.

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