Does Your Money Work For You?
As this blog has mentioned in the past, buying a multi-family home is a profitable alternative to the standard, single-family rental unit. A multi-family home is an ideal vehicle for building wealth, as it provides extra income and more security than single-occupancy rental units. However, buying a multi-family home is easier said than done, and it can be hard to envision what the process is actually like without a concrete example.
Fortunately, Pickett Street’s Amanda Weis provides us with a perfect concrete example. As Pickett Street’s Client Care Representative, Amanda has plenty of experience in property management, and she’s owned rental properties before. However, until recently, Amanda’s rental property was a single-family home that earned just $100 in profits each month. Upon selling the unit, Amanda used the profits from the sale (via the perpetually helpful 1031 exchange) to purchase a multi-family home.
Or, more accurately, two multi-family homes. Starting her search in King and Snohomish counties, Amanda was initially frustrated by high property prices. However, once she moved her search to Tacoma in Pierce County, Amanda found two affordable duplexes requiring minimal up-front work. Since Tacoma’s rental market is booming, Amanda rented all four units in her duplexes relatively quickly, enabling her to begin paying down the duplexes and bringing in profits with rental fees. All in all, Amanda sees investing in a multi-family home as an opportunity to make your money work for you.
Reflecting on her experience buying a multi-family home, Amanda pinpointed a few pieces of advice. First, she noted, it’s important for prospective multi-family homeowners to pinpoint a desired location for the property and become familiar with the rules, regulations, and laws in said location. Moreover, homeowners should identify what they want the property to be used for: will the homeowner live in one of the units, is the property intended for portfolio diversification, or is it going to be an avenue for retirement? Then, it’s important to work with an experienced, professional realtor, preferably one who’s familiar with multi-family sales, to navigate the transaction as smoothly as possible. Finally, most multi-family homeowners should hire an experienced property manager, since most people (unlike Amanda) do not have extensive professional histories in real estate. Property managers can maximize rents, manage relationships with tenants, and keep your property in line with necessary state and federal laws. In other words, a property manager will skillfully handle all the hardest tasks, making your life as a multi-family homeowner much easier.
While this process might sound complicated, Amanda fully attests to its benefits, as her double duplex investment has resulted in valuable earnings and a steady cash flow. In that case, Amanda reasons that prospective multi-family homeowners should take the plunge and move forward with their multi-family home aspirations, as the transaction’s benefits more than outweigh the costs.