How To Know If A Multi-Family Property Is Worth It in Fort Collins

Multi-family property investing might seem like the best way to almost guarantee a constant cash flow. Sounds great right? Well, not all properties are equal. In this post, we will help you learn how to evaluate so you can know if a multi-family property is worth it! 

When you are making an investment in a multi-family property, you must look at not only the price but the value too. Price is what you pay and the value is what you can expect to receive from the property. A building with many units immediately offers more value than a single home because you have a lower risk of vacancies.

However, there are costs that occur when maintaining many units. Here are the numbers you need to know when making a multi-family property investment!

How To Know If A Multi-Family Property Is Worth It in Fort Collins

What Are The Operating Expenses?

How much will it cost you to maintain the property? This includes cleaning, landscaping, and general upkeep. Since multi-family properties tend to have higher turnover than a single-family home, you might be paying more for cleaning, carpets, and paint. A good way to estimate costs when you are considering purchasing a multi-family investment is the 50% rule. This rule takes your income, divides it in two and uses that number as your expense estimate.

Don’t forget to keep a reserve for repairs on bigger ticket items. Water heater, dishwasher, a/c units… while these things should have a good amount of life in them, you need to be prepared for when something breaks.

Purchasing a multi-family investment will require you wear a lot of hats. The maintenance man, landlord, property manager, sales pro. If you need assistance in any of these areas, make sure those costs are added to your operating budget.

Net Operating Income or NOI

This is the annual income you can expect to make once you have deducted your operating expenses. You should also deduct your mortgage or any loans you have against the property. You will need to know the average vacancy rate in order to determine how long it will take you to recoup your investment.

Cap Rate

To really understand what you should expect in returns, you need to look at the cap rate of the property. To get this number, take your NOI and divide it by the cost of the property. A high cap rate will be riskier but have will have the potential for greater returns. A lower rate will cost more, be safer and have lower returns. A good cap rate to shoot for is about 6%.

Adding Value

The goal is to always increase the NOI while still being fair to your renters. Cosmetic upgrades can validate increases in the monthly rent payment. Appliances, paint, landscaping, and revived fixtures can help give a worn rental, new life. Adding in new sorts of revenue can help you boost your NOI. Consider adding fees for parking, laundry, application, pet and late fees. These are all valid costs that can boost your income substantially.

Are you interested in purchasing a multi-family property in Fort Collins? If so, we can help you run the numbers so you make the best investment possible! Send us an email here to let us know what you are looking for, or give us a call to discuss multi-family properties in Fort Collins and throughout ! (970) 744-4944

 

 

Blake Stevens

About Blake Stevens

I grew up in Fort Collins, I lived in Loveland and I’ve worked and played sports all over Northern Colorado. I love our area, NoCo. Our company borrows money from private lenders so that they get a good return secured against a hard asset they can see and understand. We take a problem property off a sellers hands and get them the cash they want. We fix up the worst houses or even just average houses and make them the gem of the neighborhood, which improves our community one house at a time. We put trades people to work and stimulate the local economy. We partner with people looking to get a return on their capital in long term rentals providing quality housing while earning a good secure return. All around it’s a win, win, win business that I love.

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