Multifamily Apartment Lawyer

Multifamily Apartment Lawyer

In order for property to qualify as a piece of multifamily real estate, it must contain more than one, entirely separate, unit of housing. Multifamily properties may be contained within one building, or one complex of buildings, most commonly in the form of an apartment building. Although investors might automatically count out multifamily properties due to how expensive they can be, they are actually much easier to finance relative to single-family units. Because investing in multifamily properties tends to generate a more consistent, positive cash flow, banks are much more likely to approve a loan. In addition, the risk of a vacancy is spread across multiple units, instead of just one. Those who acquire a multifamily real estate investment enjoy being able to build up a large portfolio quickly. For example, an investor can who acquires in one apartment complex can add 10 units to their portfolio at once, rather than slowly purchasing 10 individual properties over time. Finally, owning a multifamily property helps to justify the financial expenditure of hiring a property management company, rather than having to manage a property yourself.

Apartment Buildings & Condos

Representing the most common types of multifamily real estate listings, multifamily apartments and condos both have multiple units. One would often encounter buildings with multiple stories, with multiple units on each floor. Generally, the difference between apartments and condos is ownership. Apartment units are most often rented out by the owner, while condominium units are individually owned by residents.

Townhouses & Duplexes

A townhouse might be thought of as a multifamily property that most closely resembles a single-family property. Townhouses often have more than one floor and its own private entrance, but will share a wall with another townhouse. Duplexes are simply one building that has been divided into two separate units. The units within a duplex will each have their own private entrance, and will not share a common area. Duplexes are often larger houses that have been split and repurposed into two units, and are often found in residential neighborhoods.

Triplexes & Quadruplexes

Similar to duplexes, triplexes and quadruplexes are a single property that has been split up into multiple units that are exclusive of each other. As one may guess, triplexes contain three units, while quadruplexes contain four. Quadruplexes are also called quadplexes or fourplexes.

Mixed Use Buildings

Mixed-use buildings serve more than one purpose, which could include residential, commercial, cultural, institutional or industrial. Often found in urban areas, one might expect to find a mixed-use building featuring commercial businesses on the first floor and residences on the upper floors. You may also see a mixed-use building owned by an education institution, containing student apartments and classrooms or theaters within the property.

Investing In Multifamily Properties

• Conduct a preliminary deal analysis: You’ll want to learn how to run a quick deal analysis to help you filter through the different multifamily real estate for sale. You’ll want to gather information such as the listing price, number of units, rental price for each unit, and the location. From this information, you can come up with a rough estimate of your annual expenses, mortgage payments, and cash flow before showing more interest in a property.
• Research your financing options: Once you identify a property that offers promising cash flow, it is helpful to start thinking about how you will finance the purchase of this property. Whether you opt for a conventional loan, private lender, partnership, or even refinance a different property, aligning your financing early on will help you make a swift and credible offer when you find the perfect property.
• Check out the property in person: It is critical that you conduct a walk-through of a property before you make an offer. Looking at the property in person can help you confirm the number and condition of units as advertised, and also look for potential benefits or risks associated with managing the property.

• Estimate any repairs that will be needed: While walking through the property, be sure to make a list of repairs that you were able to identify visually. Although a formal inspection will come later, this step will help you come up with a better estimate of repair costs for your deeper financial analysis.
• Conduct a deeper financial analysis: Once you have conducted a property walk-through and have detailed lists of property specifications and repair estimates, you now have enough information to run a deeper financial analysis. This step is critical regardless of your investing niche – investors who mind their due diligence before striking up a deal will have better chances of having success. Use your financial analysis to figure out total monthly income, expenses, your annual net operating income, your capitalization rate, and your monthly cash flow. These calculations should help provide further evidence for or against this investment deal.
• Decide on any contingency clauses: As you prepare to make your first offer, you will also want to think about what contingency clauses you may want to put into place, to help protect yourself. Although including too many clauses may scare a seller away, many seasoned investors will advocate for including a property inspection clause at all times.
• Make your offer and negotiate terms: Knowing your local market really well will help you with your negotiation strategy. This will help you have an instinct of what works and what won’t work, such as low-ball offers, earnest money, contingencies, cover letters. Negotiations can go on for several days to several weeks, and can be conducted through your agent if you decide to work with one.
• Schedule a property inspection: If you included a property inspection clause in your purchase agreement, be prepared to schedule the inspection within the defined time frame. A professional home inspector can help you go through the property with a fine-tooth comb and help you come up with a more detailed list of repairs.
• Secure your financing: It should be noted that the closing period may affect what type of financing you can obtain. For example, if you only have two weeks to close, obtaining a conventional loan may be difficult. Knowing how you will finance your deal in advance helps you negotiate closing terms that will allow you enough time for your preferred financing method.
• Wait for the closing date: Those who successfully reach the closing stage will enact transactions through an attorney or title companies. Be prepared to sign and manage a wide array of documents and await the closing date. After the closing date, the property will be all yours, after which you will be an official owner of a multifamily property.

Investing In Multifamily Real Estate

• Consider living in one of the units: Owner-occupied financing options become available for investors who plan to occupy a unit in a multifamily property, with a maximum of four units. Investors who do not plan to occupy their investment property are often required to make a 20 percent down payment, but terms become more favorable for owner-occupied scenarios.
• Work with an experienced broker: This goes especially for investors new to multifamily investing, but experienced professionals provide can provide great insight no matter what your experience. A broker can help guide you through the buying process, provide insights to the potential benefits or downsides to the property, and help you mind your due diligence.

• Ask for historical records and documents: Reach out to the property’s current owner or property manager and request for current and previous records, such as income statements, expense sheets, and the current rent roll. You can also ask for a copy of the current lease, and inquire about any vacancies. All this detailed information can help you run a deeper financial analysis.
• Closely examine potential cash flow: After you have collected all the necessary information, pay very close attention to your monthly and annual cash flow, as well as your cash-on-cash return. These numbers can help you value the property in detail and determine whether or not it will truly make a good investment.
• Consider hiring professional management: If you are new to managing multifamily properties, or have no prior property management experience, you should give careful consideration to hiring a professional management company. Managing a property with multiple units can eat up a lot of your time, including collecting rent, finance and accounting, addressing maintenance, repairs and other tenant requests. Investors should value their own time and the opportunity cost of managing a property, or more, in place of pursuing other investment opportunities.

Tips On How To Sell Your Multifamily Property

• Review leases, occupancy and tenant rights.
• Advertise property specifications accurately.
• Play up the curb appeal.
• Clean up and update common areas.
• Consider sprucing up any parking areas.
• Double-check doors, locks and windows.
• Prepare important records and documents.
• Schedule an inspection before listing the property.
• Hire an experienced agent who specializes in multifamily real estate.

When thinking about different ways to help sell your multifamily property, the best strategy is to place yourself into the shoes of a prospective buyer as much as possible. First, make sure to review your current leases, occupancy and tenant rights to help you avoid getting into any trouble when selling the property to a new owner. Next, recall how important property specifications were to you in your deal analysis process. When marketing your property, make sure to report specifications as accurately as possible to help prospective buyers with their deal analysis process. You will also want to spruce up the physical appeal of the property. You can boost curb appeal with a new coat of paint and tending to landscaping. You can also clean up and update common areas, to help improve first impressions. This also applies to any parking areas, which can be approved by making sure parking spots are clearly painted and pavement is resealed if necessary. Next, comb through your property and make sure all doors, locks and windows are functioning property, to help demonstrate that the property has been well-maintained. Once you have addressed the physical aspects of your property, you can now focus on collecting and preparing important records and documents. Serious buyers will likely ask for copies of leases, income and expense reports, your current rent roll, and other important documents. Having all of these records ready will make your life much easier. You may also want to consider completing a general home inspection prior to listing your property.

This process will help you identify and address any issues in advance that may be off-putting to prospective buyers. Finally, you may want to give careful consideration to working with an agent who is experienced in selling multifamily properties. Then can help you effectively market the property through the use of social media and websites, as well as handling showings. Investing in multifamily real estate may seem like a large, complex undertaking, but to the contrary, it can be quite achievable. Not only do you have better access to conventional financing in some cases, the financial structure of multifamily properties even helps to justify hiring a property management company. This, in turn, can help free up a significant chunk of your time so that you may pursue other investing opportunities. Those who have never considered investing in multifamily real estate before will hopefully take away some of its notable benefits.

Real Estate Investing: What You Should Know

It all looks so easy on HGTV: A couple buys a house, does a complete makeover, and sells it for a tidy profit. Sometimes things go wrong, but, in the end, everyone is happy. So you might be thinking, “I could do that!” Or you might be looking to make money on rental properties instead. Real estate investing can indeed be profitable, but you need some business savvy, diligence, and a willingness to take risks.

Do You Have What It Takes?

Despite what you may read in advertisements, real estate investing is not a quick and easy road to riches. If you buy a house to flip, you might make a bundle because of rising home values, or the real estate market could crash as it did in 2009. Or you could uncover toxic mold that turns your rehab into a teardown. If you buy rental property, it will probably increase in value over time, but unexpected repairs or vacancies can wreak havoc with your short-term finances. Be sure you’re ready for the risks, as well as the rewards. Unlike other investments such as stocks, real estate is a physical thing that needs attention. Rehabbing a house or apartment building means doing a lot of physical labor or managing several contractors—or both. People who do it successfully usually have some skills or training in real estate or remodeling or repair. If you own rental property, you’ll have to collect rent and manage the property, or you’ll pay a property manager an 8-10 percent fee to do it for you. When your tenant calls while you’re on vacation to say the toilet is leaking, you must be willing and able to get the problem fixed quickly.

Do Your Homework and Set Goals

Real estate is a huge investment, and there’s a lot to know about buying, selling, and managing property. Before you do anything, read books and articles, and/or attend seminars and classes, to get yourself up to speed. Acquaint yourself with the real estate market in the area where you might want to invest. Go to open houses, drive around, talk to local realtors, and look at listings online. Get a good feel for the neighborhoods and what property is typically worth. Your bank account and credit rating matter, so they should be in order before you attempt to buy anything. Mortgages for investment properties usually require a 20-30 percent down payment, and they carry a higher interest rate than loans for your principal residence. Beyond that, decide what you want to get out of your real estate investment. Are you looking for an asset that will grow in value over time? An income stream to supplement your regular income? Do you want to flip houses or be a landlord? What kind of property do you want to invest in—commercial, residential, beach condos? Clarifying your goals will help you identify the right real estate investment.

Treat Real Estate Like a Business—and Do the Math

Success or failure at real estate investing often comes down to the math. Investment real estate should make you money—that’s the point of an investment—so it’s critical to avoid these common mistakes:
• Paying too much: Know the market, and don’t overpay because you fall in love with a house. Look for motivated sellers, wholesale properties, and “the worst house in the best neighborhood.”
• Underestimating expenses: The purchase price is just the beginning of the money you’ll spend on investment real estate. Before you buy, compare your expenses to the income you can expect to receive. In addition to the down payment and monthly mortgage payment, typical expenses include:

• Renovations: Some experts advise adding 50 percent to both the estimated renovation costs and the amount of time that will be needed to complete them.
• Ongoing rental property expenses: like homeowners’ association fees, taxes, insurance, maintenance, and utilities, plus occasional larger expenses like a new roof. You’ll periodically have vacancies with no tenants and no rent coming in. Expect to spend at least 35-50 percent of the monthly rent amount on these expenses, in addition to your monthly mortgage payment.

Attorney For Multi-Family Apartments

When you need legal help with multi-family apartments in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

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