Multi-family housing refers to a setting in which multiple residential units are connected by shared walls or are enclosed in a single building. These may include townhouses, duplexes, triplexes, fourplexes, multi-story apartment buildings, bungalow courts, or high-rise condominiums or apartments. If you own any such multi-family real estate, follow these tips to make the most of them:
Finding Your 50%
When comparing your residential real estate investment options, one great strategy is to use the 50% rule and calculate your net operating income (NOI). The estimate represents one way of determining your return on investment (ROI).
But what exactly is the 50% rule? It proves most valuable when you don’t have access to neighborhood real estate comparables. All you need to do is take your expected income and divide it by 2. The result gives your estimated expense. Deduct this number from your estimated monthly income to reach your net operating income.
Determine Your Cap Rate
Learn how to calculate your capitalization rate, which is an indication of how quickly you’ll get your return on real estate investments. Multiply your monthly net operating income (NOI) by 12 to make the number annual, and divide the result with your property’s current market value. Your aim should be to keep your cap rate between 5% and 10%. Anything higher could mean too high risk and anything lower means your investment may not have enough yield.
Calculating Estimated Monthly Cash Flow
Figuring out your estimated monthly cash flow brings into equation the estimated mortgage payments. Simply deduct your monthly mortgage from your property’s net operating income to reach the amount you’ll be adding to your wallet. This cash flow estimate helps you determine whether or not your investment will be worthwhile.
Multi-Family Properties In New York and Florida
Not keeping track of the returns and how much your properties are worth can lead to poor decision-making and loss of income. By following the aforementioned tips, you should be able to derive the most value from your real estate investments.
If you’re in the phase of exploring multi-family or other property investment options or are looking for rental residential or commercial vacancies, get in touch with Milbrook Properties without delay. We also offer high-quality property management services.