One of the most commonly sought options for new landlords is a multifamily property. The idea is fairly straightforward; with a single property, you can have multiple separate units and multiple separate families, resulting in more cash flow overall, and more stability compared to a single-family home.
However, multifamily homes come with their own set of challenges, and you need to be prepared for those challenges long before you start your path as a landlord.
Tips for Ongoing Management
With these strategies, you can improve your efficiency and profitability—while reducing stress at the same time:
1. Start small.
When you start doing the math, it’s easy to get excited about the prospects of a large operation, with multiple multifamily properties in your portfolio. However, it’s usually better to get your feet wet with a much smaller operation—preferably a single multifamily dwelling, with only two or three families living in it. If you’re a novice, your mistakes will be less impactful this way, and you’ll have a chance to learn in a more controlled environment.
2. Do your research on cash flow.
Next, do your own research on cash flow. If you’re buying an existing multifamily property, you may not necessarily be able to trust the cash flow projections on the listing. These may be old figures or may be overestimated compared to current market conditions. Pay attention to what current rent prices in the area look like and estimate your expenses as accurately as possible. If you can’t make the equations work, don’t buy the property.
3. Overestimate your expenses.
Speaking of planning for expenses, try to estimate yours as conservatively as possible. Multifamily homes have additional variables compared to standard properties, including more possible repairs to make and a higher number of variables influencing your total costs. If you overestimate your expenses, you’ll be more likely to stay in line with your cash flow projections, and you won’t have to worry when maintenance or repairs end up costing more than you expected.
4. Add extra perks.
Obviously, your property needs to be in good shape if you’re going to attract the right renters—but it’s the little touches that put your property ahead of the competition. Adding extra perks, like an extra parking spot, or a dishwasher, can make your property seem far more appealing, and attract better renters at the same time. This is especially helpful advice for multifamily homes since you can add perks that benefit each family individually, such as free Wi-Fi that all your units can share.
5. Set community ground rules.
If you have multiple families living in the same building, you may eventually run into issues with how they engage one another as a community. As a simple example, your tenants may be responsible for bringing trash to the curb but share the same trash bin. You may also have to deal with one tenant making too much noise for the others. It’s important for you to set community “ground rules” that you expect your tenants to follow, in writing and proactively, to prevent some of these dilemmas.
6. Build a good relationship with each family.
While you’re at it, work to build good relationships with each individual or family living at the property. When you and your tenants have mutual respect for one another, your tenant turnover and property vacancy rates will significantly decline. Your tenants will also be more comfortable bringing issues to your attention, so you’ll be able to take fast, proactive action before it becomes a bigger problem.
7. Proactively manage personality clashes.
If and when you notice personality clashes between families, try to resolve them as amicably and as quickly as possible. For example, you may find one tenant upset that the other is occupying their designated parking space, or as mentioned earlier, you may have to deal with noise issues between the tenants. Be respectful and fair when navigating these issues, and always aim to resolve things with a friendly conversation first, before resorting to fees, penalties, or legal action.
8. Make good use of vacancies.
Practicing routine maintenance in a multifamily property can get complicated. Because you have more people occupying the building at the same time, you won’t have the same level of access, and you won’t have access as frequently, to the areas you need to conduct repairs, maintenance, or upgrades. The best way to counter this is to make good use of your vacancies when they come up; they’re a critical opportunity to gain access to a unit (or the property as a whole), so you can minimize tenant disturbances.
9. Respond quickly to maintenance requests.
If and when you do get maintenance requests, or identifications of possible issues, try to resolve them as quickly as possible—even if it means inconveniencing your tenants. Make it clear that your actions come from a desire to keep the property in good shape and explain why you need to make these repairs. Responding to incidents like these quickly will prevent further damage from accumulating and will demonstrate your commitment to your tenants and your property—which can keep tenant turnover low.
10. Have an endgame.
Finally, remember why you got involved with multifamily real estate investing in the first place, and come up with an endgame strategy. Do you plan on selling the property for a profit eventually? If so, when? And are you planning on selling it while it’s still occupied by tenants, or after you have a few vacancies? It’s good to document these plans in advance, so you can follow them consistently.
If you’re ready to start looking for a multifamily property, or if you already have one, but are new to being a landlord, contact Green Residential today! We’ve got the experts you need at almost any stage of the process, from buying agents to help you find the right property to property managers to help you stay sane as you manage your property.