For First Time Multi-Family Managers

Making the jump from single-family rental properties to multi-family can seem like a daunting prospect to some investors. Instead of dealing with just one property and one set of tenants, suddenly you’re handling two, three, or even more. For someone who’s only ever dealt in single-family properties, this can take quite an adjustment.

Then there are those investors who LOVE multi-family units. They swear by them, and they’ve got reason. There’s a lot to love about properties that contain multiple opportunities for cashflow, and they can certainly help you reach your financial goals faster than if you own just one single-family home.

There are lots of pros and cons that come with multi-family investment properties, but before I list some of those, let’s be clear about what constitutes a multi-family home. Multi-family properties are those that contain two or more units under one roof. However, they can be further categorized, as some are considered residential and some commercial. Basically, it’s like this:

  • Properties with two, three, or four units are small multi-family and therefore are considered residential;
  • Properties with five or more units are large multi-family and are considered commercial properties.

This distinction matters when you’re determining a property’s value or taking out a loan to purchase it, among other reasons. But that’s a topic for another post. On to the pros and cons!

Pros

  1. Potential for increased cashflow – As I mentioned earlier, when you have multiple units, there are increased opportunities for cashflow. More units = greater potential for more money.
  2. One loan for multiple units – If you plan to finance your purchase, the process is streamlined because you only need to take out one loan, even though there are multiple units.
  3. Less emotion involved – With single-family homes, emotions tend to get in the way more than they do with a multi-family property. When you’re dealing with multiple units, it’s more about the math and making decisions that make you more money. It’s easier to separate emotion from logic with multi-family…don’t ask me why, but it is!
  4. Less risk – While risk is inherent with any investment property, it can be reduced with a multi-family one, especially where vacancy is concerned. When a single-family property goes vacant, you have ZERO cashflow. But with a multi-family, you’re only down one unit, rather than the entire property. There’s a buffer there that insulates you from a major financial strain, and you won’t get this with a single-family property.
  5. Valuation – For large multi-family properties that are classified as commercial, there’s a benefit in how they’re valued. Single-family home values are based on several factors, and one of the biggest is the surrounding properties. With a commercial property, however, surrounding properties don’t matter. What matters is the cap rate, which shows the rate of return that’s based on the expected income. This means that external factors (like surrounding properties) won’t affect the value, but internal ones (like making improvements or raising the rent) can have a major positive impact.

Cons

  1. Costs more – Multi-family homes generally cost more to buy than a single-family property. Makes sense, when you consider that more people will live in it and provide multiple streams of income for the owner.
  2. Fewer properties available – There are also fewer of these homes available to investors, which means less options for you and potentially fierce competition among investors.
  3. Competition is more experienced – Speaking of competition, investors who are after multi-family homes, and particularly ones that qualify as commercial properties, are generally more experienced and savvy. If you’re not quite as experienced, they might have have an edge on you when it comes to finding and negotiating deals.
  4. Regulations – Multi-family homes that classify as commercial also come with more regulations that you have to follow. While there are rules in place for any investment property, they become much stricter when you own a commercial property, or even a small multi-family unit.
  5. More complicated – Multi-family properties can be more complicated, in general. When you look at management (rent collection, tenant screening, maintenance, etc.), it becomes much more complex. You’re dealing with a larger building, more units, more people, and inevitably more issues.

Before you buy a multi-family rental property, be sure to consider these pros and cons and do your own research as well. Multi-family investing isn’t for everyone, but if you believe it is right for you, you can stand to make significant financial gains if you make smart choices.

 

This article is a repost from Bigger Pockets

Shopping For Rental Properties? Here’s What To Look For | Ali Safavi Real Estate

When looking for a rental property there are a number of things to consider: neighborhood, price, renovations, potential, etc. You want everything to be perfect, but perfect often comes at a high price. So instead we look for good enough. Most new purchases are going to come with a certain level of remodeling. So how do you decide what problems are okay and which ones are deal breakers?

The following Ali Safavi Real Estate list is a guide on what to look out for when shopping for rental properties. Each building is unique, and your skillset for renovations is unique. None of these are must-follows, but they will get you thinking in the right direction.

  1. Ali Safavi Real Estate: There’s Something Rotten

When you walk into a house, and it smells like an old sock, most of us have the impulse to turn around. Ironically, bad smells are one of the easiest problems to fix in a property but one of the things that drives away 99% of the competition. Bad smells are generally caused by one or more of a few things, none of which are difficult to solve:

  • Rotten Food
  • Pets
  • Water damage
  • Smoke damage
  • Old socks

Most of this list is fairly easy to fix. Finding an easy solution may allow you to get a good deal when others where too turned off to make an offer. One caveat is bad sewage. That’s a problem that could be rooted in plumbing issues, which can be a hassle you don’t want to take on.

  1. Ali Safavi Real Estate: Finding Profitability In The Bedroom

Everyone once in a while you’ll look at a home that is listed as a 2 bedrooms, but hidden inside is potential for more. Some homes, for some reason, have an entire room that is listed for storage or other odd purposes. Do you know an extra bedroom can add as much as $25,000 to the value of the home? This means if you see potential for an easy switch from room to bedroom, jump on it.

  1. Ali Safavi Real Estate: Don’t Be Turned Off By Ugly

You’ve likely heard the phrase “kitchens and baths sell houses,” and it’s not an exaggeration! If you walk into a home and the kitchen looks like a dilapidated version of a 1950s movie set, don’t be deterred. As we have written about before at Ali Safavi Real Estate, often a fresh coast of pain will do wonders in transforming old to look new.

There are also a number of affordable options for new countertops. You don’t have to break the bank to bring a fresh aesthetic to these areas. Especially in the age of Pinterest. Do some online browsing to get ideas, then set a budget and go hunting.

  1. The Bad Roof

Roofs are tricky business. We’ve written before than a bed roof is a sign to say “goodbye” to a property. It really comes down to what you are prepared to pay for long term benefit. A leaky roof is a problem and needs to be addressed immediately. The cost of renovation can reach upwards of $20,000. However, if you take the time to do some shopping, I’ve heard rates as low as $7,000.

The benefit to getting a property with a leaky roof is that many people, as we have suggested ourselves, will not purchase a property with a bad roof. This means you are probably able to get a pretty good price. If you’re able to lay out the money up front (and find a good contractor) the long term benefits will overshadow the short term payout. I wouldn’t suggest only looking for leaky roof properties, but just allow for that to not be an automatic no.

  1. Ali Safavi Real Estate: A Moldy Solution

If you have a leaky roof, chances are you will also have mold. If you don’t have proper ventilation in your bathroom, you probably will have mold there as well. Mold is a scary sight. Seeing mold is like seeing a spider, we want to run away from it (or is that just me)?

The thing about mold is that it can be both fixed and prevented. Replacing the roof will eliminate the moisture causing the mold in the ceiling. Having better ventilation in your bathroom will do the same. The only place where mold should be a major deterrent is in the basement. Mold down there can be a sign of a bad foundation – and that is a problem you don’t want to add to your list.

  1. Ali Safavi Real Estate: Hoarders

Hoarders are an issue I have personal experience with. I used to live next to one and could see into their unit. The smell was so bad that it would waft out of the window and into my apartment. For the longest time I thought there was hidden feces under my bed until I realized it was that apartment. When that lady finally moved out, it took movers three days to clear the until. The look on their faces said it all.

As unpleasant as it was, the fix was relatively simple. Hire some movers and they’ll take care of the junk. Hire a cleaning service and they’ll take care of the smell and any stains. Once those two jobs are done you have yourself a unit that is attractive and ready to sell. Don’t let junk scare you, unless it’s piling up in your own backyard.

 

 

Austin Brunkhorst – Realtor

Austin Brunkhorst is a member of Coldwell Banker’s most successful branch nationwide…and a great guy.

Since joining Coldwell Banker Beverly Hills in 2007, Austin has closed over 50 transactions, representing clients throughout the Los Angeles area, including Beverly Hills, Brentwood, Hancock Park, Hollywood/Hollywood Hills, Mid Los Angeles, Santa Monica and various parts of the San Fernando Valley.

In addition to helping buyers and sellers, he represents banks and asset management companies in the sale of real-estate owned property. His expertise in the foreclosure market has been a great asset to home buyer and investor clients looking to capitalize in this arena.

Prior to arriving at Coldwell Banker, Austin played collegiate tennis at Northwestern University and graduated with a Bachelor’s degree in Communication Studies. After graduation, he was employed by Starcom Worldwide, one of the largest advertising companies in the world. After working as a strategic media planner on the Kellogg’s business, Austin helped jumpstart a Los Angeles branch, devoted primarily to the Disney account. He worked as a Supervisor and Associate Director for 5 years, planning media campaigns for the launch of Disney, Touchstone Pictures and Pixar blockbuster movie releases, including Pirates of the Caribbean, National Treasure, The Incredibles and Cars. He credits his past advertising and marketing background as a contributing factor in creating a brand and marketing a property to its fullest potential. Austin sums this up best saying…

For Austin, each client and their respective property are unique entities. His goal is to differentiate a property and break away from the competition, providing the best value and the best service for his clients.

Visit Austin’s website.

 

-Ali Safavi

Robyn Calvin – Investor

Robyn Calvin is a terrific primarily single-family investor based out of the Inglewood, CA area.

She brings years of experience as a marketer, project manager, and administrator. Her analytical ability, knowledge, attention to detail and negotiation skills give her clients confidence that their most important purchases and sales are being handled by a diligent, passionate professional.

What’s so great about Robyn, besides her knowledge, is that she take the time to get to know her clients. Personal relationships are key in real estate. She communicates in a way that makes both savvy investors, as well as beginners, feel comfortable.

Robyn is currently working with a young PropTech company, that has developed innovative and digitalized real estate living concepts worldwide. She is looking for Partners (owners/investors/developers) of 4+ units in the Los Angeles area who are interested in discussing a long-term master lease opportunity that will increase the yield of the property. (They currently have 1000 units at 96% occupancy in Berlin & Manhattan.)

Robyn covers dozens of zip codes in the Los Angeles area. If you have a chance to connect with her, I highly recommend it!

Read more reviews.