Multi-family properties are a smart business investment for investors. If properly maintained and managed, they can generate a substantial amount of income to build an investment portfolio or to set aside for retirement. It may seem relatively easy to purchase a multi-family property and just let the cash roll in, but it's a bit more complicated than that.
Real Estate Investment Questions You Must Ask Yourself
If you are considering investing in a multi-family building, you must do some self-reflection first. You need to be realistic when determining what you can handle. First, you must determine whether you are a passive or active investor. As a passive investor, you'll be more than happy to hire a property management company to run the day-to-day operations of your new purchase. You don't want to be involved in those mundane tasks. If you want to be more hands-on and be heavily involved in your multi-family investment, you would be an active investor. Defining yourself in this way makes a huge difference for how you should plan the management of your building.
You should also take into consideration your years of investing experience and goals for the property. If you're a beginner investor, it would be smart to confer with more senior investors. They can help you create a strategy, and you can go to them with questions. Your goals for the property shouldn't be overlooked either. If you want to build a wealth portfolio with this investment, you will treat it differently than if you considered it as a savings account.
The final question you must ask yourself before you buy a multi-family property is who is on your core team roster? Your core team is made up of realtors, mortgage brokers, a property management company, bankers, and lawyers. They all will help advise you on several different areas to ensure your investment is successful. Having this go-to core team will greatly impact your experience as a multi-family property investor.
The Long-Term Multi-Family Building Advantage
In several of our past blogs, we've highlighted the differences between long-term multi-family investment and short-term investments. There are key differences that investors get with a long-term strategy that a short-term property hold doesn't. When you're invested for the long-term, your multi-family property can better weather market fluctuations. You have time to wait for the market to bounce back again. This fact is especially true for multi-family investments in large cities like Edmonton. There will always be a greater future demand for rentals than there is in the present. There will always be a need.
However, a long-term multi-family investment isn't without disadvantages of course; nothing can be perfect. With a long-term investment such as this, investors will find that their ROI will be delayed a bit. Their capital will be locked into the investment for some time, and it will take a few years before they see any results or significant ROI.
Expectations for a Long-Term Multi-Family Building
Before committing to a long-term multi-family building, you need to ask yourself these questions because your answers will define what your plan should be. Your core team will help you iron out the details. If you disclose your future plans and goals to them, they can advise you on what properties you shouldn't buy and which ones would be ideal for you. They can put your expectations in place and execute your final management plan. If your plans are too different for the property, your core team will help you realize this before it's too late to do anything about it. It's critical that you include them in your future plans so they can help you plan accordingly.
Real estate investing requires some form of self-discovery. With the realizations that come with that, you can then start to put a long-term strategy in place for your multi-family investment. Having a core team to help you along the way is imperative and will drastically increase your likelihood of success.