What You Should Know About Buying Multi-Family in Portland
If you've been considering jumping into the multi-family real estate world there are some tips to know before making the big step. Many first-time buyers think of buying a small apartment building as a great investment but there are some issues and concerns you need to know about. However, it is a great investment if you know what you're undertaking and you know how to move forward when issues arise. Here are some of my best tips to buying multi-family homes in Portland Oregon.
- Your building will contain multiple tenants. I know this seems obvious but many first-time multi-family buyers may not realize the drama and headaches they could be getting into. Not every complex has problems but the more tenants you have the more risk for a variety of personalities and characteristics you'll get. You should evaluate the existing tenants on their bases of longevity and payment history. You need to know how to screen prospective tenants properly and weigh the value of your property versus the tenants living there.
- Multi-family buildings are typically sold by commercial real estate brokers. Because I am familiar with both residential and commercial I can facilitate the transactions regardless of the property type. Using an agent that can do both and understands both sides of the coin can negotiate better for your price and your terms.
- Multi-family homes often have a lot of competition. You will want to investigate the local vacancy rates, fair market rents, any covenant and restrictions to the building and other marketplace factors. All of these details can help you make an informed decision on which building works for your investment needs. Missing one of these vital numbers can create problems and headaches in the future.
- Understand how multifamily mortgages work. They are different than single-family home loans and lenders put more demand on the property's ability to generate income than the buyers credit necessarily. If you're financing, lenders will look to the property and what it will generate, so make sure you know your numbers. Think Shark Tank; the better you know your numbers and what the property will generate, the better you'll be able to appeal to lenders.
- Understand the multifamily buildings are typically for investment purposes. You'll need to know two major factors; the cap rate and the gross rent multiplier in order to assess the building income potential. The cap rate is based on the annual net operating income before taxes divided by the purchase price of the present market value. The gross rent multiplier is the purchase price divided by the gross operating income or total rents. Knowing your numbers will help determine if the property makes sense not only to your lenders but your investment portfolio as well.
Related post from PBCoastal.com - Don't buy anything without a buyer's agent
Want to know more? Call me today or visit my website for all multi-family investment properties in Portland.