Savvy Seattle real estate investors understand the value of investing in multi-family properties. These types of assets come with a number of benefits, and they can help you grow an investment portfolio successfully.
If you’ve never thought about investing in multi-family rental properties, you need to know that you’re missing out on a potential opportunity. The Seattle rental market is especially great for these investment types. Multi-family homes are a great way to diversify your investment portfolio and reduce the risk of vacancy. Your cash flow will increase, and you’ll always have a strong pool of tenants looking to rent your unit.
Understanding how to budget for your multi-family property is important. You’ll need a budget for purchasing the investment and for maintaining it over time.
Here’s what we can tell you about how to budget for your multi-family properties in Seattle.
Understand Your Own Investment Goals
The way in which you budget for multi-family investment properties will depend on your investment goals and what you’re hoping to accomplish. As you’re setting your investment goals, you’re likely thinking about your budget, and as you review those goals going forward, you need to know for sure that your budget matches the properties you want to buy.
Large portfolios plan differently than small portfolios. Are you expecting to buy a handful of units in various locations, or will you invest in a complete building? Buying a six-unit building is much different than buying 10 units inside a high-rise complex.
Strategize for budgeting according to your investment goals so you know where you are and what you need. You can call the SJA Real Estate Advisors to help you plan your future portfolio.
Plan Your Financing with Seattle Multi-family Rentals
Don’t make the mistake of throwing all your cash reserves into the purchase of your investment property. You are likely to need cash available for routine repairs, emergency maintenance, as well as marketing, screening, and other unexpected costs.
Most investors can find financing that allows them to leverage the purchase with a down payment of around 25 percent. To get these terms from your lender, you’ll need to document that the income from your multi-family property will be sufficient to cover your mortgage payments.
In some ways, financing this property type is less difficult for well-qualified investors. Multi-family properties bring owners more income than a single-family investment with more income because you’ll be earning multiple rents.
But, these investments also come with more expenses, and that will require some careful budgeting. Landscaping, pest control, and preventative HVAC maintenance will be bills that you have to cover. If you have common areas and parking lots or garages, those are additional expenses.
Include all your variable costs with your fixed costs when you’re measuring your projected income and operating costs.
It does not have to be a conventional mortgage or a traditional bank loan when you’re financing your multifamily purchase. You can do a cash out refinance on another asset you may have. Perhaps you’ll let go of one property and buy a multi-family building via the 1031 exchange. There are options, and you should explore them all.
Budgeting for Utilities in Seattle Multi-family Investments
Budget for utilities before you buy a property.
Utilities with multi-family homes work a bit differently than they do with single-family investments. You may want to have each tenant set up their own electric and other utility accounts. Or, you may want to cover the bills for the entire building and then bill the costs back to tenants based on usage. Another option is to charge a flat fee for water, electricity, gas, sewer, and trash removal.
The best course of action will depend on the property itself and the number of tenants you have. Budget for what’s more cost-effective.
Lower Vacancy Rates with Seattle Multi-family Homes
While most investors agonize over vacancy loss and try to budget in a way that the temporary loss of rent is not a terrible shock, multi-family investment properties come with some built-in protection against that risk.
When you own several multi-family properties or an apartment building, you’re bringing in rent from several different sources. That means when one property is vacant, the financial loss isn’t nearly as devastating as it is when you’re renting out a single-family home. You still have plenty of other income streams to cover that loss. You won’t find yourself without any income at all in a given month.
This takes some of the pressure off of your budgeting needs.
Multi-family Investments are Long Term Investments
Plan to hold your asset for as long as it makes sense. If you want to build wealth through real estate investing, buying and holding a multi-family investment property (or properties) is an excellent way to achieve your goal.
This is not a get-rich-quick investment strategy.
Nor should it be.
Flipping homes may be a popular way to earn money on real estate investments when we’re talking about single-family homes. But, very few investors can successfully flip an apartment building.
A multi-family property is a long-term investment, and you need to treat it that way. New investors in these types of assets will have to accept that the first year or two will come with a steep learning curve. You’ll be learning how to navigate the market, the turnover, and the maintenance.
As you hold onto your multi-family assets, you’ll notice your cash flow growing. If you can keep your units occupied, you’re going to see some great results in both the short and the long term. It’s easy to lose patience, but remember that this multi-family property, when well-maintained and occupied, will earn you some great income.
Whether you’re working out a budget for a multi-family acquisition in Seattle or you need to think about how to grow your portfolio or budget for maintenance, we’re the local property management resource you can count on. Please contact us at SJA Property Management.
SJA is a premier Seattle property management company serving Seattle, Seattle’s Eastside & the Greater Puget Sound region since 2009. We provide sophisticated, personalized, and comprehensive management services for single-family residences, luxury homes, condominiums, and multifamily buildings.
