Purchasing a multi-family building is a huge investment and undertaking. An investor simply can't just buy the building and wash their hands of it. Even if a property manager is hired, you will still have to be involved with strategic decisions and other issues.Investing in multi-family real estate will make you money if you can keep vacancy rates and tenant turnover to a minimum. However, even though you can try your best, these factors can be hard to control and keep down. Therefore, it's important to look at other ways that investors can make the most of their multi-family buildings.
What You can do to Maximize Your Multi-Family Investment
- Capitalize on tax breaks: It is critical for real estate investors to keep records and receipts of all multi-family building related expenses to reduce taxable profits. If your vacancy rates are low, you'll be seeing a lot of profit. Therefore, you'll need expenses to offset that amount. As an investor, you can claim all maintenance repair costs on your real estate property. Mortgage interest can also be deducted, along with the expenses incurred when buying the multi-family building. Expenses such as insurance, business-related travel, home office expenses, and contractors can be claimed on your income taxes, too.
- Increase the amount of rentable square footage: Although common areas in your multi-family building are a bonus for tenants to come together and socialize, it's hard to capture their true worth in rent. If you have hallway closets that don't belong to a particular unit, consider giving the key to a tenant nearby or open it up directly into the unit. Doing so will increase the amount of square feet available to the tenant, allowing you to charge a bit more rent and increase your overall income.
- Target your dream tenants: Renting to your dream tenants is ideal; they are the ones who'll love the unit so much they would never think of leaving. Getting perfect tenants is a financial bonus; if they're suitable for the property, they're less likely to leave. You also won't have to worry about the costs associated with cleaning the unit and repeatedly showing it to prospective renters. Therefore, it's important to maintain or even upgrade your multi-family building with your ideal tenants' taste. Are they looking for specific upgrades like hardwood floors or dazzling backsplash? Giving ideal tenants what they want is the best way to attract them. A word to the wise, though. Conduct in-depth research on what your ideal tenants want. You don't want to complete expensive upgrades if they don't help attract the right people.
- Work smarter, not harder: Yes, as an investor and landlord you'll have to work hard to maintain your multi-family building. This type of investment isn't for the fainthearted. However, you can take advantage of technology out there to help make your job easier and keep you organized. Specific software applications such as Cozy can assist you with collecting applications for units, collecting rent, and screening prospective tenants. Applications such as these are designed to help reduce your property management overhead. Instead of spending time physically showing units, you could also use technology platforms such as YouTube or Vimeo to showcase the space. Film a walk around of the unit and upload the video with a link to the application form. Investing in helpful technology will free up your time to focus on other issues that need your attention.
Investing in multi-family buildings is a big task that comes with a large workload. If you take advantage of applicable tax breaks, increase your rentable square footage, target your ideal tenants, and work smarter, these actions will help you make the most out of your multi-family investment.