This is the ultimate guide on how to buy a multifamily property for sale! Here you will learn the 5 essential steps.
Let me tell you, buying a multifamily home for investment is the smartest method to make money in real estate. However, it is a process, and you need to be aware of every step of the way. After all, buying an investment property will get you to financial independence if you do it right. So, let’s skip any further introduction and jump right to our topic: How to find multifamily homes for sale.
Related: Why Investing in Multifamily Homes Is a Must for 2019
Step 1: Perform a Neighborhood Analysis
Finding a multifamily property for sale starts with a neighborhood assessment. So, before you go looking for a specific multifamily home, make sure you look into different neighborhoods that have multifamily homes available for purchase. The following is what you should be looking for in a neighborhood:
1. The area has the potential for high rental yield. In other words, there are indications of high rental demand for multifamily real estate.
2. The neighborhood is not only desirable for you as a real estate investor but for your tenants as well. Your goal is to rent out the investment property as quickly as possible to start making money.
3. Facilities, amenities, services, transportation, businesses, job market, population, demographics, and crime rate all play a significant role in a tenant’s choice as well as real estate appreciation. So, prioritize these factors and make sure you research them well before deciding on a specific area for a multifamily real estate investment.
There are several ways to perform neighborhood analysis, of course. One way is to drive around the area to get a feel for it. Put yourself in the tenant’s shoes and see if it’s a place you would want to live in. Another way is to visit real estate investor websites, such as Mashvisor, and use the neighborhood analysis tools they provide. You will save time and effort, and, most importantly, get the most accurate neighborhood assessment.
Another thing to keep in mind is if you don’t find the ideal neighborhood in your local area, there is nothing wrong with going out of state and exploring the possibilities. When it comes to real estate investing, there’s plenty of fish in the sea and the US multifamily investment market is full of opportunities as long as you keep an open mind about it!
Step 2: Explore Options for Financing a Multifamily Property for Sale
Once you’ve found the ideal neighborhood for your rental property, you should have an idea of what the median property prices are. So, it is time to explore your financing options and eventually get pre-approved by a mortgage lender. One way to find a lender is by contacting banks in your local area. Many banks offer special programs for multifamily home investments. If this method is not working for you, then you can always go online and search online financing platforms.
But before you approach any conventional lenders, make sure your finances are in order. To get pre-approved to finance a multifamily property for sale, you need a good credit score. If that’s not the case for you, start improving your credit with this guide from Mashvisor: How Can You Improve Your Credit Score for Financing Investment Properties?
After you’ve found the perfect financing option, get your documentation in order. You will need to provide employment statements, a credit score report, tax returns, and bank statements for a specific period. Other documentation might be required, but these are the basics that every mortgage lender asks for. This is the very reason why we recommend you start working on your finances in the initial stages of buying a multifamily home, even before you begin the actual property search. A pre-approval letter will help you budget for your investment property and prove to your real estate agent and sellers that you are serious.
Step 3: Find a Real Estate Agent
At some point in your search for a multifamily property for sale, you are going to need an expert to help you navigate through the process. Therefore, we recommend that you hire a real estate investment agent who will help you find, analyze, make offers, and negotiate deals.
There are plenty of places where you can find a real estate agent to work with you. Of course, a traditional local search is always an option. You can also do a simple Google search. Another option is to use our real estate platform. In our Agent Directory, you can find and view agents’ profiles from various areas across the US. All you have to do is choose a location and you’ll find everything you are looking for.
Step 4: Narrow It Down to One Multifamily Property for Sale
You might think that hiring an agent is where finding a lucrative multifamily home for sale ends. But, let me tell you, that’s not true. An agent will help you find a few options that make sense for your investment goals. However, together with the agent, you will have to perform an investment property analysis to single out the best multifamily property for sale. This process includes an assessment of return on investment, taking into account rental yields, CoC return, and cap rate. Along with the budget and the location, these factors will narrow down your options to the one that makes the most sense for making money in real estate. Try using an online investment property calculator to help with your analysis
Step 5: Make an Offer, Negotiate, and Seal the Deal!
After evaluating the multifamily home of your choice, go ahead and make an offer. Negotiating is essential to getting a good deal on a multifamily property for sale, so don’t just settle for the asking price. One way you can assess the right price is by getting a home appraisal or a comparative market analysis which your agent can help you conduct. One rule to abide by before closing a deal is to inspect the property. Make sure you are paying the right amount for the condition of the investment property. Examine it for any hidden defects and address them adequately. Once you’ve done all that and decided you’re getting the best real estate deal, go ahead and close! Congratulations, that multifamily property for sale is now yours!