Investing in Multi-Family Real Estate: Cash Flow It’s Fundamental
As you go about considering whether or not an investment in multi-family real estate is the best option for you, there is one consideration that you really must keep in mind. Above all else, when it comes investing in multi-family real estate, you must pay close attention to the issue of cash flow when considering whether or not you should buy a particular piece of property.
Through this article you are provided with an overview of what you need to consider when analyzing the cash flow associated with a piece of multi-family real estate that you might be considering purchasing at this point in time.
The first element of cash flow, the most fundamental element of the cash flow issue, is how much is brought in on average on rent each and every month. Of course, you need to understand that there can be some variations in the rental payment made each month. Therefore, your analysis needs to extend back at least a year to eighteen months. By going back in time this far you will be able to calculate appropriately the average monthly rent that is earned by the property.
The second element that you will want to consider when it comes to cash flow is the vacancy rate. Some apartments simply have a historically higher vacancy rate than do other properties. Therefore, it is important for you to closely examine the historical vacancy rate of any property that you are considering buying.
The next element that needs to be brought into the occasion is an analysis of maintenance costs and other expenses associated with the property. Once again you will want to go back in time in order to get the best idea of what these expenses have amounted to on average over that time period.
Finally, when considering cash flow projections, you will want to make sure you factor in how much you will have to pay on mortgage payments each month. Obviously, your mortgage payments will be your most important expense over the course of any month.
By paying attention and applying all of these factors you will be well on your way to accurately summarizing the expected cash flow associated with the property. You will be in the best position to make an intelligent decision about the purchase of a particular piece of multi-family residential real estate.