subject: Investing In Homes [print this page] Real estate has long been considered one of the best investments that you can make. Over time, property values will rise giving you the opportunity to create wealth and in some cases generate income along the way. Investing in multi family properties is one way to accomplish both of those things. The trick is to find properties in areas where homes hold their value and rental units are in demand.
One of the best places to start your search for rental properties is in an area near a college. If there is a campus in your town, search for multi family properties that are close enough for the renters to walk to school. A number of college students prefer to live off of campus and not in one of the dormitories. You may face a lot of turnover in tenants near a college or university but you will always have new prospective renters coming in every fall.
To determine the size of the property you can manage you must examine your budget. Talk to your bank or savings and loan to determine what type of financing you qualify for. There are a number of possible ways to do multi family financing. If you have the cash for a down payment you can go with a conventional mortgage and if you do not want to put any money down you might be able to tap into the equity in your current home to get started. To figure out what you can afford in terms of the mortgage payment you have to realistically determine the rental income that the building will generate. Always do a detailed budget as a starting point.
If you are looking at a four family building and have determined that you can rent each unit for $500 a month then you know you can count on $2000 income. However, you cannot afford a $2000 mortgage payment on the property. You have to determine the cost of taxes and insurance. Plus, there is the cost of utilities to the building and what about emergency repairs? For this example, assume taxes are $200 a month and utilities are $300 a month which leaves you $1500 in income. You still do not want your mortgage payment to be this high because you need to start a repair fund and want to leave some profit for yourself. Place $200 into a special account just for building repairs and set aside $300 a month for profit which can be saved and used for the down payment on your next property. This leaves $1000 for your mortgage and tax bill which should be more than enough to cover the cost of a $150,000 to $200,000 multi family property.
If your first endeavor is successful it is very likely that your bank will want to work with you again in the future. The secret to making money in multi family real estate investing is to have several properties generating income for you and all the while you are building equity in the property. You are using the money from your renters to pay off the buildings without ever having to tap into your own cash.
