Investing in a multi-unit apartment building can be an exciting experience with great long term benefits. However, if you aren't prepared it can be a long and frustrating experience. PadMint wants to let you know what you should expect and give you some tips about investing in Los Angeles multifamily. We will refer to all duplex's, triplex's, fourplex's, and 5+ unit buildings as multifamily in this blog post.
Investing in multifamily buildings here in Los Angeles is competitive. The cost of housing in LA is expensive. This creates a demand for people who are interested in living in one unit and renting out the other(s) aka "owner-occupied". There are also a lot of individuals who make a living out of buying multifamily properties which adds to the demand. There are still plenty of opportunities for multifamily investments but it's going to take some focus.
2. Although it's not required, get Pre-Approved for a loan.
We see it time and time again. People search for a property they like without being pre-approved for a loan, find a property they like, and then get let down. In this case, usually one of two things happens. 1) The Seller doesn't take an offer seriously from the Buyer who hasn't been pre-approved and chooses someone else. 2) The Buyer gets lucky and gets a contract accepted but then realizes they didn't get approved for the amount they would have needed. PadMint makes getting pre-approved easy and straight to the point so you can focus on the fun part.. finding a property!
3. Use a real estate agent who knows about income producing properties, PadMint has you covered.
You'd be suprised how many buyers use agents who don't know anything about income producing properties. They often work with one of their friends or people they've been referred to but those agents typically do residential real estate. The problem with this? Different from buying a home, there will need to be additional forms filled out by any of the tenants currently living in the building. These documents lay out and confirm the tenants' lease terms. If these forms are not filled out or are filled out incorrectly it can become a nightmare after you close on the property. For example, you may have seen a listing and noticed one of the tenants was paying $1,000/month for rent. However, you did not fill out the correct forms and confirm this during Escrow. After you've purchased the property the tenant says that they were paying the last owner $750/month. These types of issues can turn into big issues which you will not want to deal with after you've just purchsed the property. There are a number of other precautions that need to be considered during Escrow with income producing properties.
4. Most likely, you will have to submit offers on multiple properties before closing on a deal.
This isn't always the case and is dependent on a few factors. One of them being where the property is located and how many properties are for sale there. Another being Days On Market or DOM. Properties that just hit the market usually garner more attention from potential buyers, especially if they are priced well. This creates a competitive environment where you could be going up against multiple buyers. Sometimes it works out and other times it doesn't. This happens in residential real estate as well and you just want to make sure you are best positioned as a buyer (pre-approved, ready to open escrow, working with an agent who can streamline the process.). PadMint can help you identify hidden gems that may have been sitting on the market but have had recent price reductions that make these deals more attractive.
5. Welcome to being a Landlord.
Congrats! You've successfully closed on a multi-unit apartment property. Whether you are living on the property with the other tenant(s) or not you will need to adjust to being a landlord. You'll want to understand leases and the do's and dont's of being a landlord. PadMint is here to help you find the post-close services you may be interested in such as property management companies or tools to use if you plan on managing the property yourself.
Purchasing your first owner-occupied or investment property is a milestone. It's an exciting time, and one of the first real steps toward building wealth. PadMint allows you to search the same listings as Redfin or Zillow but in a way that's geared toward investment properties. You can see the properties current rents, nearby sales, nearby rents, and filter by relevant information such as vacancies. We help take you from A-Z when buying your first investment property and make sure everything runs smooth and is streamlined. Please reach out to us at firstname.lastname@example.org if you'd like to start your buying experience today.