Top 5 Tips for Multifamily Property Management
Though many real estate investors start by looking for single-family real estate, it’s not the only investment type for industry beginners. Even if you don’t represent a real estate investment trust (REIT), you can still find ways to invest in multifamily homes. Whether you’re a newer real estate investor or you’re looking to make the switch from more commercial real estate opportunities, it’s important to know exactly what you’re signing up for. While real estate investing is a great way to build your portfolio, you also need to understand multifamily investment property management.
When you invest in multifamily properties, you’re also investing in a few key property management responsibilities. After all, when you own a rental property, you not only have to keep the home in good condition, but you have to ensure you’re making enough rental income and that you’re also keeping your tenants happy. To learn more about managing a multifamily investment property, here are a few tips you need to know.
1. Start small and scale appropriately.
Real estate investing often requires precise planning, especially for multifamily properties. If you’ve successfully managed a single-family home or you have experience in commercial real estate, it may be easier for you to pick up the skills required by a multifamily property landlord. However, if you’re not as experienced working with tenants, or you’ve never managed a property, hired a landlord, or invested in the real estate market, you’re going to want to start small when you’re working with a residential property. Even if you want to start generating larger amounts of rental income, you shouldn’t overextend yourself, as this can impact your cash flow and dividends.
Unlike regularly maintaining a vacation rental or hiring a cleaning crew for a commercial property, this type of property requires long-term care, especially if you want tenants to renew their leases to keep your property at capacity. The best way to do this is with a reasonable focus. If you’re a single investor or you’re part of a smaller group, there are drawbacks when you overextend your property management capabilities. Start with a single multifamily property and choose good investments as an opportunity to expand your portfolio once you’ve mastered fundamentals.
2. Add perks to encourage full capacity.
Even as you’re managing a multifamily property, you still need to make passive income from your real estate. The best way to do this is to ensure that you’re regularly at full renter capacity. So, how do you encourage renters these days, especially in the wake of the COVID-19 recession and a busy real-estate market? Since multifamily properties and apartment buildings are long-term investments, your best options are often working on your tenant perks, amenities, and quality-of-life improvements.
When you spend on amenities and perks, it’s good to make quick pros and cons lists to help you calculate your total return. Especially if you need additional funds for any down payment amounts or real estate developer fees, it’s a good idea to verify that you’re investing in upgrades that help you generate capital gains and real wealth. While your first multifamily property might not make you a millionaire, a successful individual investor will still work to add benefits and perks to this type of real estate to encourage renters to sign on for the long haul.
3. Screen your tenants.
When you’re working with U.S. residential real estate, the good news is that there are always people looking for homes. Whether you’re investing in house flip opportunities, or you want to make real investments into long-term real estate properties, you must find the right tenants. After all, your renters are kind of like “everyday investors” for your property. They help you pay the monthly mortgage, provide you with gains, and sometimes help increase your tangible assets’ capital value. If you have lower mortgage interest rates, this can be incredibly beneficial and help you generate more taxable income.
When you’re looking at lessees, take their entire financial history into account. In some cases, you want to consider multiple asset classes, different types of taxable income, and other payment sources to ensure that a renter can pay their lease each month. A quick background check can also help you determine someone’s rental history and whether or not they’ll require a credit sponsor or co-signer.
4. Maintain the property.
Some real estate owners and investors seem to think that all they have to do is broker leases, trim the hedge bushes once a year, and respond to renter complaints as they arise. While that’s certainly part of the job, you’ll have difficulty increasing your net worth if you’re not maintaining your property. Once you cover the monthly mortgage payments or fees, how much more do you invest in the multifamily home? If you’re not finding ways to invest in regular property maintenance, inspections, and even exterior cleaning or landscaping services, it’s harder to increase the home’s value and makes the property less appealing for a future house flip.
5. Know how to market yourself.
Any rental property, vacation rental, or Airbnb listing needs to market itself to attract renters and stay at capacity. When you look at the difference between industry pros and new rental property owners, the differences are distinct. Many vacation rental and real estate pros know how to effectively leverage marketing, advertising, and content creation to attract renters to their properties. This helps ensure that you’re generating consistent income. It also enables you to focus on portfolio diversification, whether you find other investments within the real estate industry or you’re looking for supplemental mutual fund opportunities. When you market yourself correctly, you can automate some mundane lead generation tactics and focus on qualified applicants to grow your real estate portfolio.
About the Author:
Annie Dickerson and her partner Julie Lam are founders of Goodegg Investments — an award-winning real estate private equity firm — and creators of the Real Estate Accelerator Mentorship Program. They are authors of the book Investing For Good and hosts of the popular Life & Money Show podcast: https://goodegginvestments.com/
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.