Have you considered boosting your income by investing in multifamily properties? To be successful in this area, you’ll have to crunch some numbers. Your goal is to achieve stable, predictable income from the property. Here are some tips for choosing the right multifamily property to invest in.
Not Just Any Multifamily Property Will Do
You can only get reliable passive income from a property if you choose the right one to start with. Before you make an offer on a property, you’ll need to calculate the net operating income – or the difference between your projected income and your estimated expenses for the property.
Projected Income – Estimated Expenses = Net Operating Income (NOI)
Once you figure out your projected net operating income, subtract your estimated monthly mortgage payment from that number. Whatever is left over will be your monthly cash flow. Is it enough to make investing in this property worth it?
Calculate the Risk and Return
How long will it take you to get a return, and is the risk worth it? Once you’ve figured out the estimated income, expenses, and mortgage payment, you’ll want to figure out your cap rate. To do this, take your net operating income, multiply it by 12 to get your annual NOI, and then divide it by the market value of the property. This will get you the capitalization rate, which should be in the 5%-10% range.
Have a Trusted Property Manager By Your Side
To invest passively in multifamily, you can’t be the one responsible for late-night calls from tenants – you’ll need a property manager. Property managers are skilled professionals when it comes to dealing with tenants, repairs, maintenance, and the other ins and outs of managing a multifamily property. They will make your job as landlord so much easier and less stressful. With a property management company on your side, you can focus on your day job (or whatever else is important to you!) while also making a passive income on the side.
Keyword: multifamily
Is Hiring a Property Manager a Smart Move?
Some landlords choose to manage their properties on their own, while others hire a property management company to handle their commercial real estate operations. Trying to decide whether you should hire a property manager? Here are some things to consider as you make your decision.
How Property Managers Help Landlords
Property managers work as independent contractors and usually take care of the following tasks:
- Communicating with prospects and tenants
- Marketing to fill vacancies
- Collecting rent each month
- Handling repairs
- Keeping up with care and maintenance, indoors and out
- Solving problems with tenants
Having a property manager can give you daily peace of mind while also taking tasks off your plate. You don’t need to have any special skills or experience to invest in multifamily properties. Your property management company will fill in the gaps with their expertise.
When to Consider Hiring a Property Manager
Properties managers are indispensable if you have multiple properties, if you live far away from your properties, or if you don’t want to be the only one responsible for day-to-day management tasks. Many landlords don’t have time, while others are simply not interested in making landlording their full-time job. If any of these things apply to you, then a property manager can be a huge asset to you!
If you do decide to hire a property manager, it will be a significant expense. However, it can also create enormous opportunity for growth, and it will free up your time significantly. Professional property managers are worth it if you want to invest passively in commercial real estate!
Keyword: commercial real estate