If you’re considering investing in multi-family properties, then you want to be informed before making this major purchase. You’re likely going into this endeavor with the intention of renting the units to generate revenue, but being a landlord isn’t for everyone. Read on to learn what you need to know before purchasing a New York multi-family.
General Questions to Ask
Before you zero in on potential properties, there are some general considerations to make. Ask these questions.
- What is your available capital? – Prepare to buy a multi-family property to reduce the purchase price by at least 20 percent. You should also overestimate the closing costs and reserve requirements.
- How much are you willing to participate? – Even if you’re less hands on and you employ a property manager, the time and commitment needed (especially initially) is considerable.
- What are the revenue requirements? – If you intend to base any part of your decision on how much money you can make, you must consider your revenue investment.
- What are the risks? – Always be mindful of your risk tolerance. For example, crowdfunding may carry numerous risks including fraud and questionable returns, while other means may produce more consistency and continual appreciation.
When you’ve narrowed down your search after considering things like location, layout and size, here are important things to know about the specific properties:
- Current Rental Rates: You want to stay current with existing rent prices in the area because your cash flow from the property will be based on how much rent you can receive. By being aware of the current rents, you can help to ensure that your rental rates are in sync with comparable parties and can adjust accordingly.
- Current Occupancy Rates: It’s important to know this before you make an offer. The occupancy rate directly affects the rental income that the property produces, so this information will help to ensure that the property will actually generate the income you need.
- Current Leases: You want to be able to know about the agreement of terms that are in effect for current tenants. As a potential buyer, you can request a copy from the owner; owners generally are required to keep them on file.
- Turnover Rates: If there’s a constant back and forth, this means more wear and tear, as opposed to more consistency with long-term tenants and stability, which means easier maintenance.
- Recent Maintenance: As a future landlord, consider hiring a home inspector to uncover any possible hazards (such as lead, asbestos) before proceeding with the purchase.
- Legal Disputes: It is essential to discover any legal disputes between current tenants and the owner. By inquiring about this, you can gain more understanding about the potential legal risks you could face if you buy the property.
- Utility Bills: Water, electric, and gas are all necessary expenses that will have to be paid every month; this information will help to assess the potential income of the property.
- Commission Rebate: A commission rebate allows a buyer’s agent to give them a part of the commission that the agent gets for representation. Be sure to find a broker who offers them before you hire one to represent you on a multi-family purchase. It can make the purchase more affordable and allows you to use the saved money on other things.
Talk to a NY Real Estate Lawyer Today
If you’re considering getting into real estate investments with a multi-family property, you will want to ensure that it’s a smooth process. Get in touch with one of our MOWK Law lawyers who can help you navigate through the New York market. Just contact us today to learn more.