Is the Multi -Family Property That You Have Your Eye On a Good Investment?

Today I was asked how to decide if purchasing a multi-family in North Attleboro was a good investment idea. There are many opinions out there, but here is mine.

I believe before considering purchasing a multi family home in the Greater North Attleboro area it is always important to consider the cash flow potential of the investment property. While a variety of models may be used to determine an investment home’s cash flow, This Realtorand investor prefers a straight forward approach that does not rely on future values or anticipated appreciation, but rather uses historical data on the home and similar property type comparisons.

• Find yourself copy of a “For Rent Guide” or other apartment search magazine, Stop & Shop has them, or the local paper works too. Examine rents for comparable sized units, bedroom size and apartmentswithin the same neighborhood as yours. For example, lets say that you are considering a duplex with 3 bedrooms and 1 bath on each side. Find out how much 3 bedroom apartments with 1 bathroom are renting for in the area. If there are apartments located within the same block as your units, find out how much they are renting for, prospect renters in North Attleboro will be comparing so you should see how you stack up to the competition. Are their units updated compared to yours, do they have features that yours do not? What are some selling points that your units offer. Lets say that you find that 3 bedroom 1 bath apartments where your rental is located are renting for $1,000 a month.

• Also before considering the purchase of the home in North Attleboro, ask the prior owner for a copy the Schedule E for the home. This document is basically an income or income loss statement for the home and shows the rental income and expenses and the net income/loss generated for the year. A net loss is not a bad thing, most owners will report losses for tax purposes… look beyond the bottom line to examine the rents charged. Are the rents below market value based on your Step 1 evaluation? If the owner is paying for utilities, how much do the utilities run each year, what is the average utility cost? How long does a unit sit vacant on average? A long vacant period could mean that the home is undesirable or it could simply mean that the landlord was not active in marketing the unit, or maybe it sat vacant due to a remodel…find out. Were there any major expenses during the year such as rewiring, plumbing, new roof? While these items may cause the income statement to reflect a loss, seeing these expenses on a prior owners Schedule E is a good sign, since you will not need to make these improvements yourself.

• Last but not least, do the math. Take your total rental amounts and multiply by .9 to account for vacancies. In this example, $3000 x .9 = $2700 mo. From this amount subtract your mortgage payment and any monthly expenses that will be paid by you, the owner. Monthly expenses may include: water, sewer, garbage, electric, gas, lawn care service, insurance, prorated property taxes and mortgage insurance if applicable. As a general rule of thumb  I have placed 10% of each months rent into a separate account to cover any incidental expenses or repairs. If the resulting number is positive, you have a cash flowing property.

If you are looking for a Realtor who has a passion for multifamily investing in the Greater North Attleboro Area, I would love to help find you the perfect one for you. I am a resident of North Attleboro a Realtor in Attleboro with Kensington Real Estate Brokerage.

Tiffany Chapdelaine Wetherbee- Kensington Real Estate Brokerage

North Attleboro Realtor and Real Estate Concierge

Kensington Real Estate Brokerage, Attleboro Massachusetts

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