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Investing in Multifamily Income Property – Focusing on the Fundamentals

Getting involved in multifamily real estate investment can be very lucrative and rewarding, but it’s easy to make costly mistakes by getting caught up in the excitement of chasing real estate riches. For now, forget all the stories you’ve read about buying, fixing and flipping for huge profits. Focusing on some basic fundamentals could save you a lot of time and money in the long run.

To begin with, meeting with a bank or mortgage broker is a must. This is the first step I recommend to everyone I consult with. Unless you know how much you can afford and what the costs associated with financing the purchase will be, you can’t accurately analyze any real estate investment. Local and regional banks are a good place to start as many are still actively lending even in the current constrained economic environment. Freddie Mac has several programs available for multifamily lending and recently set a 2008 record in volume for its multifamily whole loan and bond guarantee business, up 10% from 2007.

If you plan on finding the best buying opportunities in your market, I would suggest working with a local real estate agent. The relationships and networks the top agents in your market have established will be difficult for you to replicate by sorting through internet listings on a part time basis. Take advantage of their experience, knowledge and professional networks, specifically those related to finance, law, property inspection, and construction.

When choosing to work with an agent, make sure to find someone who specializes in buying and selling investment property whether it’s residential or commercial. You want an agent who understands how to evaluate different types of income property for two reasons; one, this will increase the odds that you make a good buy and two; you won’t waste your time looking at property that does not meet your investment criteria.

Now that you are pre-qualified and have a professional working for you, the fun is ready to begin. Clearly define your buying criteria and investment strategy. If you don’t have specific buying criteria or an investment strategy, work with a trusted professional to help determine what it is you are trying to achieve through this investment.

Maybe you are looking for a small building where you plan to live in one unit and rent the others to help cover the mortgage. Or maybe you want to buy strictly on a cash flow basis and demand a specific return. Whatever it is, spell it out and focus on finding it. You may eventually determine that you don’t want to live in the same building as your tenants or that the neighborhood you would like to buy in is out of your price range. It’s OK to adjust your strategy as you go. The important thing is to stay focused on your goals.

When it comes to analyzing income property, there are several common methods to utilize. Real estate markets are generally inefficient and each approach has distinct advantages and disadvantages, so it’s important to use multiple approaches when valuing a real estate asset. You will want to become familiar with how to determine the Capitalization Rate (CAP rate), the Gross Rent Multiplier (GRM) and how to extrapolate information for use in the Sales Comparison Approach. Many investors also prefer to determine the Cash on Cash return as well as the Internal Rate of Return for the investment period. Generally, the larger the property, the more you need to drill down through the numbers and apply different approaches.

Depending on the type and size of the property, the expenses could play a significant part in the evaluation process. Familiarize yourself with common expenses associated with the specific property type you are interested in. Sellers will often times understate expenses to make the asset appear more profitable. Your agent should be able to explain to you what expenses are typical. Expenses that are often understated or completely overlooked by many sellers include those for management, maintenance, leasing commissions, cleaning, decorating, supplies, landscaping, accounting and legal.

Remember, even if you plan to be an owner operator of the property, you still need to pay yourself for the work you do. Not necessarily in cash, but in the overall return on the investment. If you are managing the property and handling several maintenance and janitorial tasks and operating at a break even point, a slight gain or even a loss, then you need to consider that your money could provide a better return in other investment vehicles that don’t require additional work on your part.

Now that you’ve got some of the basic tools you’ll need to lay the fundamental ground work for successful investing in multifamily income property, take the time to read up on management, tenant and property maintenance topics. This is the unglamorous side of investing in real estate. If that doesn’t scare you away, then it might just be time for you to jump in and get started on the road to real estate riches.

Building an Online Business and Your List

There aren’t very many secrets that one must
know in order to start building a successful
business and create a ultimate traffic jam to
their website that creates a profitable list.

But the one thing you should know is that you
must follow these proven tips step-by-step if
you want to enjoy making money on the Internet.

1. Choose the right product;

2. Create the right web page;

3. Generate traffic to your web page;

So, let’s get started. You must pick a product
that is in high demand and that people really
want. You can either create your own digital
product or sell products created by others.

It will take some time and patience to create
your own product yet monetarily is worth it.
But, since there are hundreds of master resell
products and thousands available by companies
like Clickbank, finding one won’t be a problem.

Now that you’ve picked your product, you need
to build a great web page or sales letter. As
a bit of advice here… you can have success
with a one page sales letter as well as with a
5 page sales letter as long as it sells.

I must stress that it is imperative that you
set up your page to capture your visitor’s
name and e-mail address. Don’t make the big
mistake of trying to sell them on their first
visit. Getting their information will allow
you to contact them at a later date.

Lately, I’ve been having success having both
my list capture form and offering a sales
product on the same website. But you have to
be careful not to overload your visitor with
too much information. Make it easy to buy.

The next step is to drive targeted traffic to
your website. I will give you a few strong
tips on how to do this. I would suggest that
you do some added research at Google or check
the reference at the end of this article.

Some great ways of driving traffic to your
website while not wasting time or money
would be the following suggestions:

Joint ventures where you use other people’s
lists. Write articles and not only submit
them to great directories but put them on
your website. Try getting quality links by
utilizing social bookmarking which is also
known as tag and ping.

Stick to these proven strategies and you will
build a long-lasting business in time not to
mention that valuable list of visitors who will
buy from you down the road after they have had
the chance to get to really know your expertise.

Caring For A Vacant Building

In a sense, a building is a living, breathing organism. Systems go on and off, regular maintenance is required, and security and protection are a must. It would not be wise to completely abandon the building, if for no other reason than creating a good impression with potential buyers. The “care and feeding” of your property is essential, whether by a member of your staff (preferably the person who handled the maintenance while you occupied the building) or a professional manager. When we are hired as a property manager for a vacant building, we use extensive checklists.

We start with the exterior, and probably, at least, a once a week inspection: What is the status of the landscaping and irrigation system? Is there illegally dumped debris, or paper litter? We are also looking for problems like pest control, graffiti, potholes and unauthorized trucks. In the winter, we recommend snow plowing, at a minimum to allow full access to the building by fire trucks. In the spring and summer, grass needs to be cut and beds cleaned.

In general, you want to make the building look as occupied as possible. We highly recommend motion-detecting exterior lighting, as well as internet cameras (which are very reasonably priced today), both of which will discourage illegal dumping and abandoned vehicles, a very major headache for property managers today! If feasible, chains or fences at ingress and egress points of the property will also discourage this activity.

Moving to the interior, we will be inspecting for secure doors and windows are, burglar alarm keypads work, fire sprinkler requirements are met, and that HVAC equipment is maintained. We will also be checking for miscellaneous repairs that might be needed, interior lights, time-clock settings, and plumbing problems. And we also want to make sure that there are no roof leaks, stained ceiling tiles, or birds or animals in the building. We do not recommend “winterizing” a building and turning off the heat (especially with a sprinklered building, which is probably illegal anyway.) Building systems and construction are not designed for temperatures below freezing, so plan on maintaining at least minimum heat. We also suggest leaving a row of lights on in the warehouse, and some lights in the office area, once again to discourage break-ins or other illegal activity.

Some our other functions are to act as a 24/7 response (often behind security company separately hired by our client) for any emergencies at the building, as well as provide regular written reports on the property and actions taken. If requested by our client we will provide three bids from reputable contractors for any work required in excess of a specified minimum. We always obtain a written work-order from the client before proceeding with any work at the property, except in cases of time-of-the-essence emergency.

In summary, you must protect this very valuable asset. The cost of protection will be minuscule compared to the potential cost of neglect.