Real estate investors in Cincinnati & Dayton regularly purchase not only single family homes, but also multi-family properties of varying sizes and shapes, especially when they’re looking to diversify and expand their portfolios. There are challenges that come with owning a multi-family rental property, and sometimes it might no longer be worth the extra effort and headaches to keep them around – that’s where we come in.
Multi-family properties, which consist of two or more units in a single building, can be duplexes, triplexes, quadplexes, or large apartment complexes. The greater your number of “doors” aka “units,” the more you have to juggle, maintain, and oversee. For the normal mom-and-pop style of investor that might have accumulated anywhere from one to twenty rental properties, there will probably come a time when you’ll want to retire from the landlord biz and focus on other priorities (like traveling and relaxing, we hope). When that time comes, we’re here to take them off your hands.
Pros & Cons of Investing in Multi-Family Homes & Complexes:
As explained above, multi-family properties are properties built to house multiple families or individuals. They have multiple dwelling units in each building, with complete living spaces for each family or individual living there. Multi-family properties are typically purchased by real estate investors looking for a steady stream of passive rental income.
Pros:
1. Higher Rental Income: With more units comes more rental income potential. For each building (and thus each payment of insurance, property taxes, utilities, etc), there are consolidated bills and revenue, creating a simpler way of managing investment properties. Investors will usually get more bang for their buck when dealing in a multi-family rental property.
2. Diversification: Investing in multi-family properties can offer diversification since the investment is spread across multiple units, helping to balance out single family investments and other more traditional investment vehicles.
3. Lower Vacancy Risk: It’s unlikely that all units in a multi-family property will be vacant at once, meaning there will almost always be cash flowing via rents, and the investor doesn’t need to worry about floating payments for months of potential vacancy on the bills that don’t disappear just because a tenant isn’t living in the home at any point in time.
Cons:
1. Higher Maintenance Costs: There are more individual parts and pieces in multi-family properties, which usually will lead to higher maintenance and improvement costs. If there are four units in a building, that often means there are four separate kitchens, HVAC systems, water heaters, etc to maintain or replace.
2. More Difficult to Finance: Multi-family properties are harder to arrange financing for than single-family homes. Mortgage lenders are more cautious in approving loans for multi-family homes due to the increased risk of possible default. There are other options available than a traditional mortgage lender, but you might have to pay more in interest and points to secure these types of loans.
3. Lower Appreciation: Multi-family properties tend to appreciate at a lower rate than single-family homes. This is due to the fact that multi-family properties are typically in lower demand among homebuyers.
Here are ten things investors look at when buying multi-family properties:
1. Location: It doesn’t matter what kind of property you’re buying, location is always crucial. Desirable neighborhoods, well-performing school districts, and low crime rates all increase property values and make for a better investment long-term.
2. Number of units: The total number of units in a property factors into its appeal, and the occupancy vs vacancy rates is a big tell on how popular it is with local renters. The lower the vacancy rates and the longer the waiting lists, the more likely an investor will want to purchase the property.
3. Condition of the property: Have the units been updated in the last decade? When was the roof last replaced? When were the windows installed? All of these things come into play when determining the current market value of a property.
4. Rental income: Current cashflowing rental income will help paint a picture on what an investor can expect when purchasing a multi-family rental property – this can be demonstrated with rent rolls and current market valuation reports. Seasoned investors will be able to analyze a property without the seller having to produce a ton of complicated records and reports. They really just need the current basics on rent collection and expenses.
5. Expenses: What is the monthly operating expense for the property? This includes insurance, property taxes, owner-paid utilities, and average repairs and maintenance costs. Don’t forget lawncare and snow removal! Ohio’s mowing season is usually from April through October, and snow removal is USUALLY during the winter months, but we all know there can be freak snowstorms in May sometimes around here.
6. Cash flow: Investors will be interested in what the net cash flow will be on any given property, to see how it is performing currently and over time.
7. Prices & Financing: Most investors will need to secure financing to purchase multi-family properties of 4+ units. Ohio Cash Buyers…. has, you guessed it, cash! We don’t need to finance our purchases from landlords like yourself. You can skip all the hassle and stress dealing with lenders and appraisals and whatnot when you work with us.
8. Property management: Large portfolios will usually need a property management company of some kind to help oversee all units and keep things running smoothly. Sometimes investors might be licensed Real Estate Agents that manage their own properties. Ohio Cash Buyers has our own in-house brokerage and property management team, meaning we’ve already got all of that figured out.
9. Tenants: Are your tenants stable renters who always pay in full and on time? Have there been any problems with violations, police presence on the property, neighbor disputes, or unpaid utilities? Sometimes you can screen tenants to the moon and back and still wind up needing to file an eviction. We buy properties with all kinds of tenants in place, it’s not a problem for us.
10. Seller situation: What are you hoping to get out of selling your rental properties? What else can we help you achieve during this process? Some investors are not equipped to handle large multi-family deals, but we have purchased large apartment complexes several times over the last two decades all around Dayton and Cincinnati.
Do you have single family or multi-family properties that you’re looking to sell? Consider your options well before making a decision on how to proceed – Reach out to Ohio Cash Buyers LLC to find out how we can help!