What You Need to Know About Owning and Managing a Multifamily Rental Property

Owning multifamily rental properties can help investors earn more rental income and increase the value of their investment portfolios faster. With multifamily investments, there is also increased responsibility. There’s more liability and additional cash reserves required. Instead of renting out one property, you’re renting out two or 10 or 100. Smart investors know that this requires extra due diligence and help from real estate and property management experts.

Before You Buy: Study the Numbers and Performance

When you’re negotiating the deal to acquire a multifamily property, ask for detailed paperwork that includes income and expense statements for the current and previous years, current rent rolls, service contracts, and all existing lease agreements. You want to make sure the property meets your investment goals.

Get to know the neighborhood as well. You’ll need to consider vacancy rates and turnover numbers. Inspect the building’s condition and evaluate rent payments for timeliness and delinquency.

When you’re buying, remember that multifamily properties are not valued by their price per square foot. The important metric is the income and return on investment that the building and each individual unit generates. Look at the anticipated net operating income and cash on cash return.

Managing Los Angeles Multifamily Rental Homes

One of the benefits of investing in a multifamily property is that you will have less risk when it comes to vacancy. You can count on some sort of rental income every month. Even if one or two of your tenants give notice that they’re leaving, you still have your other tenants to bring in some money. This can provide investors with some much-needed financial security.

You can also expect lower maintenance costs when you measure the per-unit expenses. Your furnace inspections, pest control costs, and landscaping needs will cost less when a handful of properties are serviced at one time. 

However, maintaining your investment will not be easy. You’ll have to keep it up to code, and you’ll have more tenants requesting maintenance. A good investor will work with a property management team that can guarantee high quality, cost-effective maintenance. Pay attention to preventative work such as HVAC inspections and services, plumbing, and roofing. Keeping your property safe and habitable will be a large part of owning and managing multifamily properties. 

There’s also the matter of providing a great rental experience for your residents. Your main responsibility for multifamily rental properties is keeping every unit occupied. You can expect to market and show the properties more frequently because vacancies will come up. Tenant relationships will also require more of your time than they do with single-family homes. There could be disputes over parking, outdoor space, noise, pets, or common areas. Prepare to manage those conflicts if necessary.

Working with Los Angeles Property Managers

You don’t invest in multifamily rental properties in order to manage them. You invest in order to earn money and diversify your investment portfolio. Make sure you have exceptional property management lined up even before you buy. A good property manager will help you make the right investment decision. You’ll have access to data that shows you rental values, comparative market analyses, and rental trends in the micro-market you plan to buy in. Your property manager can help you budget for maintenance and vacancy costs. You’ll know that the tenants who are placed will be well-screened and responsible.

If you’d like to hear more about what to expect with your multifamily investment property in Los Angeles, please contact us at MGMT Group, Inc.