Multi-Family Real Estate Investing — Why You Should Invest

Multi-Family Real Estate Investing — Why You Should Invest

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It seems like everyone in Utah is investing in multi-family homes right now — the authorities issued 465,000 building permits for these homes in 2018 alone — and with good reason. Sure, the stock market provides lucrative returns, but it’s way too volatile. Single-family homes also prove profitable, but there’s too much risk. Some of the world’s most successful people built their wealth from multi-family real estate, and you too can capitalize on this trend. In this guide, learn why multi-family homes are possibly the best investment you can make in Utah.

 

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Single-family Homes vs. Multi-family home

Multi-family homes are residential properties that contain multiple housing units. These units can be next to each other, behind each other, or stacked on top of each other. They might consist of one building or two buildings or several buildings. There’s no specific determination for multi-family homes in Utah, but they share the following characteristics:

  • Each unit has a separate address.
  • Each unit has its own entrance.
  • Typically, each unit has its own kitchen, bedrooms, and bathrooms. However, sometimes units share communal areas. 

Multi-family homes are usually:

  • Apartment buildings
  • Student apartment buildings
  • Duplexes
  • Town-homes 

 

Single-family homes, on the other hand, are residential properties that contain one housing unit. There might be multiple people living inside these properties, but there’s just one “household.”

 

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The benefits of multi-family properties in Utah

Property investors view multi-family homes as the ultimate investment for the following reasons:

Greater cash flow

Multi-family homes have multiple housing units, so landlords make more rental income. It’s as simple as that. Some multi-family properties might contain five, 10, 20, 50, or even more housing units, allowing for much greater cash flow than single-family homes.

Recommended reading: Landlord Insurance Tips That Can Save You Money on Your Rental Property

There’s less risk

When tenants move out of single-family homes, the property might stay unoccupied for days, weeks, or even months. During this time, landlords won’t receive rental income and often experience a financial loss. Multi-family homes, however, generate rental income from many housing units. If tenants move out of one unit, landlords still receive income from tenants in other units. This will still impact cash flow, of course, but landlords have several income streams at the same time.

Greater potential for property management solutions

Although property management benefits landlords of both single-family and multi-family properties, there’s much greater scope for landlords of multi-family homes. With more cash coming in, these landlords can afford a property manager to screen tenants, handle maintenance, and facilitate all the other tasks associated with the day-to-day running of properties. This allows landlords to focus on other areas of their business without worrying about administrative responsibilities.

 

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Cheaper maintenance costs

If a landlord has multiple single-family homes in Salt Lake City or across Utah, they need to manage properties in various locations. The landlord requires contractors — plumbers, builders, electricians, etc. — in all of these locations, and this is extremely expensive. Now imagine a landlord has multiple housing units within the same property. There would be one fixed, centralized location for repairs and maintenance, which could bring down costs significantly.

Less volatile than the stock market

People often think the stock market is the best place for investments, but this isn’t always the case. Stocks fluctuate and pose significant risks to investors with little experience. Investing in multi-family homes still comes with risk (like any other potential money-making opportunity), but the real estate market is far less vulnerable than the stock market. People will always require a place to live, and there has been a significant increase in demand for rental properties across the US over the last few years. 

How to invest in Multi-family Homes

  • Calculate the return. Work out expected rental income and other revenue (storage fees, parking fees, etc.) and offset this against any expected expenses (repairs, for example). This determines whether multi-family investments are right for you. 
  • Think long-term. Work out how long it will take for you to generate a return on your investment. How long until you pay off your mortgage? Will the property increase in value? 
  • Understand your responsibilities. The federal and Utah governments require you to maintain a safe, livable space for all your tenants. This means regular maintenance and problem resolution management. If you don’t have the time or resources to do this, consider a Utah property manager. 

Final word

As you can see, multi-family real estate investing can be lucrative. If you are looking for a long-term investment, these properties generate more cash flow than single-family homes, come with less risk, are cheaper to maintain, and are less volatile than stocks. Multi-family properties also offer great potential for property management solutions like Wolfnest. 

As one of the best property management companies in Utah, we take care of all the tasks associated with multi-family homes, such as marketing, tenant screening, rent collection, maintenance, inspections, and much more. We provide you with peace of mind. 

Call us today or learn more about property management for multi-family real estate investing

Rental Advertising Tips for your Utah Rental

Rental Advertising Tips for your Utah Rental

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Rental Advertising Tips for your Utah Rental

 

Nothing puts a landlord on edge quite like a vacant unit. With no one to pay rent and expenses piling up, most want nothing more than a phone call from a qualified prospect to put their mind at ease. Sometimes renting your property is as simple as combining well written ad copy and strong sales skills. Use these tips when marketing your vacant properties.

 

Start with the basics – Good copywriting is certainly an acquired skill, but you’d be surprised how often even basic information is missing from Utah rental property listings. Always include the rental amount, property address, and property specifics like bed/bath and square footage.

 

Highlight features and benefits – Even the least desirable unit has some benefits and it’s your job to discover and highlight these. Top floor units typically have views, ground floor units are easily accessible without stairs, and homes on a busy street are closer to bus lines and freeway entrances. Every property has something that makes it unique and attractive.

 

Provide lots of information – The more details you provide, the more a prospect knows if your unit is the right fit for them. Items you should provide include detailed photos, lease terms and deposits, application process details, etc. Being this specific may limit your total number of showings, but you’ll find that the prospects who do contact you are much more qualified.

 

Sell to your audience – When showing your vacancies, try to point out features that will be important to each individual prospect. If you are showing the home to parents with young children, point out safety features like a fenced in yard. If your prospect is a student, highlight how close the unit is to public transportation that goes by the university. By tailoring your presentation to each individual tenant, you will be much more likely to fill your vacant unit.

 

Having unoccupied rental units can be very stressful for landlords, but there are some simple things you can do to help fill them quickly. Follow these tips next time you post your vacancy and watch how quickly it gets filled.

 

Why Investment Property Owners in Utah should consider refinancing through HARP?

Why Investment Property Owners in Utah should consider refinancing through HARP?

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Why Investment Property Owners in Utah should consider refinancing through HARP?

As most lenders continue to tighten mortgage requirements for investment properties, it has made it impossible for many owners to take advantage of historically low interest rates. As an investor myself, it pained me to continue to pay the mortgage on my rental property each month at a 6.5% interest rate knowing that interest rates were currently  being offered for 4%. I don’t know any investor that couldn’t benefit from the increased cash flow by reducing the interest rate on his/her property by 1.5%. I continually tried to refinance, but due to the fact that I had purchased this property in 2007 and was underwater, no lender would even entertain refinancing my mortgage.  Lucky for me a colleague of mine mentioned the possibility of refinancing through HARP.

As a property owner in Utah, you may be eligible for HARP, or the Home Affordable Refinance Plan. This was enacted in 2009 by the US government in order to allow home owners to refinance his/her rate in order to continue paying the mortgage each month and avoiding foreclosure. This was the perfect option for me, as it does not require the home to be owner-occupied and does not require an appraisal. Earlier this month, I was able to refinance my rental property from a 6.5% interest rate to 4% with closing costs totaling $500. In turn, the cash flow on my rental property went from break-even each month to $250 positive cash flow.

So what is required to qualify for HARP? First of all, your current loan must be backed by either Fannie Mae or Freddie Mac. Second of all, your current mortgage must have a securitization date prior to June 1, 2009. If these two criteria are met, you may be eligible to refinance your current mortgage through the HARP plan. Unfortunately, if your current mortgage is FHA or a jumbo loan, you will not be eligible for HARP.

So I am eligible for HAP, what do I do now? The first thing I would do is reach out to your current mortgage servicer and inquire as to the interest rate you would be eligible for with this program and the procedure to initiating this refinance. I would also reach to a few local mortgage brokers in order to determine if the interest rates they can secure are lower than the rate offered by my current mortgage servicer. It is also wise to determine the closing costs offered by each in order to determine your break-even point. Once you decide, be prepared for the process to take a significant amount of time. Lenders are receiving as many as 1,000 application per month with prospective owners wanting to participate in this program. From the time your application is submitted, the process may take 3-6 months. I will tell you though, that the savings can be well worth the wait.

If you would like more information regarding the HARP program or would like to have your rental property managed, please consider hiring FRE Property Management. We are the premier property management company in Utah and will provide you the peace of mind knowing that your investment will be taken care of. Contact us today at 673-5692.