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What makes a good multi-family house

Linda Baumgarten

Multiple family housing

What makes a good multi-family house? You are looking for several different factors.

Location

Location is very important for various reasons. Number one is that tenants like to live in nice neighborhoods where their children feel safe and where their children can go to good schools. Even tenants who have Section 8 look for good stable neighborhoods. Therefore, to reduce the amount of time it takes to fill vacancies be sure to select a property in a good neighborhood.

Another reason why location is very important is that maintenance costs are dependent on how residents and neighbors treat the neighborhood. If there is a lot of vandalism, then you will be constantly maintaining your building. Tenants who have pride of ownership will take care of their apartment and their building much better than if they are living in a neighborhood that does not have pride of ownership. Tenants who think of themselves as residents will take care of the property much better than tenants who think of themselves as tenants.

Especially important is that at some point you may want to resell the building. Or you may want to refinance the building to cash out some of your equity. If your building is in a good neighborhood, they will appraise it higher than a building with similar rents in a lesser neighborhood.

A good multifamily house is located in a neighborhood or in a city that is an appreciating in value. If the town is developing new jobs, new schools, and new economic development, the building will appreciate in value faster than if it is located in a city that is not well managed.

For example, you may want to select neighborhoods that have strong neighborhood associations to purchase your properties in. You may also want to get involved in local government, local planning and zoning boards, or local nonprofits that can influence the local government and give you a voice when taking care of your buildings. When you pick the neighborhood that you want to buy in, be sure to select the property or city that is increasing in value.

Building Configuration

The configuration of the property makes a good or negative multifamily house. For example, some multifamily houses are not traditional multifamily houses. At one point, the house might have been a single-family house and converted to a two-family house. Also, the house might have been carved up into unusual configurations of apartments.

A traditional 2-, 3-, 4- or 6- family house is the much preferred type of building. You can tell that these are traditional multifamily houses because they have apartments that are stacked up on top of each other.  Each apartment should have a separate kitchen, living room, and bedrooms.

“Railroad apartments” are less preferred. A “railroad” or “shotgun” apartment has four rooms straight in a row. In other words, you have a kitchen and then behind that is the dining room and then behind that is a bedroom and behind that is another bedroom. In this case, people will have to walk through one bedroom to get to the living room and kitchen. These apartments rent for less and take longer to fill.

There are other apartment layouts that require going through one bedroom to get to the other bedroom. Again, these are less preferred and will delay filling a vacancy.

Building Condition

It is certainly preferable to buy or purchase a multifamily house that already has good bones. For example, if you are looking at a three-family house that has a new roof, new windows, and siding, this house will be much preferable to purchasing a property that does not have the exterior already fixed up.

You should keep in mind that exterior repairs are usually expensive and delay being able to rent the units. Structural problems in a building are also quite expensive and should be avoided at all costs. And, this is especially important, ugly exteriors discourage tenants from renting. They will drive right by the building and end up renting someone else’s unit instead!

The interior condition of the building is also important. Potential tenants want to move into a neat, clean, and up-to-date unit. Showing the apartment before it is in move-in condition is usually a waste of time as tenants cannot usually imagine the new condition. You do not need to over-renovate the unit – after all, this is a rental unit. You will want to include amenities (microwave, appliances, dishwasher) that tenants in your price range are used to. You can easily do some market research by viewing other apartments in your market and price range that are available.

Note: Tenants who are willing to move into sub-standard buildings and apartments usually have a reason for being willing to do so. They probably do not qualify for better buildings. Be sure that your building does not house substandard tenants.

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