So, you want to buy an investment property in Mesa, Arizona? Excellent! Mesa is a very affordable town for both buying and renting a home. It's easy to find a MULTIfamily property in Mesa because many of them are much cheaper than single-family homes. For example, if you're interested in investing in a smaller property then you'll likely be able to get a great deal.
If you're new to the area or don't know anything about Mesa, then researching before you start going through properties can be incredibly useful! You should have a basic understanding of what kinds of things to expect when looking at MULTIfamily housing options. This article will help you get a better understanding of what you can expect when buying a Mesa investment property and share some tips to make the most out of a rather large purchase.
What to expect when buying a MULTIfamily home in Mesa, Arizona
When you first start looking at MULTIfamily properties it can be a bit daunting because there's so much information to try and take in all at once. Whether you're purchasing a traditional home or breaking into the investment business, working with an experienced real estate agent will be incredibly helpful!
Some other things you might consider doing before going out looking at MULTIfamily homes is to know what MULTIfamily housing is and how these particular deals work so that you'll have a good understanding of what you're getting into.
MULTIfamily housing just means that it's two or more homes on the same lot in one building. Most MULTIfamily properties consist of two units, but not all of them do. Sometimes there will be three multi-families on one property with six total units and other times there can be twenty units in a MULTIfamily building!
MULTIfamily properties are a great investment because multi-families can be very profitable. One thing to note is that MULTIfamily properties have issues just like any other property does. There's nothing inherent about MULTIfamily buildings that make them "magic" where they never require maintenance or repairs. Investment properties are subject to the same things as a single-family home, only on a larger scale. However, MULTIfamily homes can be very lucrative investments because of their cash flow potential and the fact that these residences can often be had at lower costs than single-family homes.
Another note: duplexes and triplexes are different from condominiums or townhouses! Duplexes and triplexes often consist of two units situated on one property. Condos and townhouses, however, consist of three to twenty homes within a single building. If you're looking for an investment property then this is something that could be really beneficial to know about before going out into the market!
Why invest in MULTIfamily properties?
MULTIfamily properties are great investments for several reasons, but probably the biggest reason is their cash flow. As long as one unit is rented out, you'll be bringing in income and that means you can cover your expenses with little to no problem. One of the other reasons that MULTIfamily properties can be profitable is because they're very flexible and easy to manage!
If you don't want to have tenants living next door but still want some rental income, check out duplexes and triplexes that feature an owner's suite. This is usually a small apartment with its own entrance that allows owners to come and go as they please without disturbing tenants.
Another reason MULTIfamily properties are great is the potential for growth. The more units a property has, the higher rent each one of those can be charged for. However MULTIfamily rental properties do require more work than single-family homes, but once they're up and running, the MULTIfamily investment kind of runs itself (assuming there's a responsible owner managing it). Each day that goes by without any problems as an investor gives you a positive return on your investment because as long as it's managed properly, it will provide steady cash flow.
The tax benefits of owning investment properties are wonderful as well! For duplex or triplex rentals, there are depreciation and interest expenses. These allow you to write off a lot more than if it was just one larger home, especially in the beginning stages before you've built up any equity. This means fewer taxes for you each year! Plus, since duplexes usually cost less than single-family homes, they're also good investments because they allow you to invest in the building for less money, which means you don't have to put as much of your own cash into it and can invest more later on! For duplexes or triplexes where you live in one basement unit and rent out the other one, there are also tax incentives. You only pay taxes on the income that comes from the rental side, not on the part that comes from your living space.
How to go about buying an investment property
Step 1 – Choose Your Target Neighborhood: If it came down to just one factor that impacts the performance of rental properties more than anything else, it would be the location. When searching for a MULTIfamily investment property, city and neighborhood can make all the difference between an owner occupant and investor occupying that property. As an investor, buying a property in the best neighborhood in town can mean the difference between having a duplex or triplex occupied 100% of the time, with no vacancies.
Step 2 – Consider the Risks: If you are not yet an experienced investor, buying MULTIfamily properties is going to be a risky venture. Most duplex sales come down to financing or lack thereof. If you have good credit, then this will probably not be an issue for you. However, if your credit is not so great, well, it might not work out so well. Similarly, there are many times when real estate purchases fall through due to legal issues such as zoning or permits. This will be a risk whenever you buy duplexes or MULTIfamily homes.
Step 3 – Choose Your Type of Property: There are three primary types of MULTIfamily properties for investors to choose from when purchasing an investment property in Mesa:
- Single-Family Home with Separate Duplex (A duplex built within an existing single family home).
- Duplex or Triplex on the Same Lot as Another Duplex or Triplex (Duplexes and triplexes that exist together on the same lot. The separate duplex units each have their own entrance and can function independently.)
- Duplex or Triplex Building Built By Developer ( A duplex or triplex built by a developer on the same lot.)
Step 4 – Understand the Neighborhood: The MULTIfamily homes in the best neighborhoods (the neighborhoods with an increase in home value and economic activity) are almost always occupied by owner occupants. If you're just starting out as an investor, buying property in the nicest neighborhoods might not be for you; it's likely that your property will end up being rented out to an occupant instead of a tenant if you do so. This will result in a loss of capital during the time when your duplex is vacant, which could take months or even years to recover from.
Step 6 – Research Census Data: We all know about using free online tools like Zillow or Trulia to find various homes, but most people neglect one of the biggest real estate related resources out there: the Census. The Census is a great tool to use when looking at real estate for sale in any area. It's simple enough that even most entry level investors can make sense of it and find what they need with relative ease.
Step 7 – Prepare Your Financing: If you're going to be financing your investment property, you will want to have all of your paperwork ready before exploring the real estate listings so that you can figure out whether or not you can afford them. This means having documentation on hand such as pay stubs, bank statements and tax returns if applicable, not just a credit score check. When buying an income-generating property, your financing will actually be a lot more complex than if you were just purchasing a single-family home. For duplexes, it's common to buy one side and then rent out the other side to generate income.
Step 8 – Choose Your Agent or Broker: You will need someone who has experience in the MULTIfamily markets of Mesa, Arizona, if you are planning on buying a MULTIfamily property. Choosing a real estate agent or broker with experience in these areas can save you from making mistakes that newbies across America make all the time such as finding duplex and triplex listings that are in inconvenient locations for tenants. This particular mistake could cost you a lot of money in the long run, so make sure that you choose wisely when hiring an agent.
Budgeting MULTIfamily properties in Mesa
When it comes to MULTIfamily housing, there are several things you should do before you spend any money on renovations or upgrades:
Make sure that all four walls, floors, ceilings and roofs of each unit are sound: There's nothing worse than buying something only to find out that your new investment property needs a lot of repairs before they can be rented out. You could invest hundreds or thousands on MULTIfamily properties only to find out that the property needs over $10,000 invested into it just to make it livable for one family!
Calculate MULTIfamily rent expectations: You can do this by looking at similar MULTIfamily houses in the area and sizing up how much their rents are compared to yours and how big your units are compared to theirs. In some cases, MULTIfamily duplexes or triplexes can have double the square footage of another MULTIfamily home - but if yours has the same square footage as a MULTIfamily house that's renting for $600 per month, chances are you're going to be priced out of the MULTIfamily rental property market.
Estimate MULTIfamily costs: You can get an idea for your investment expenses by checking with local contractors and home improvement stores. If your home is ten years old, it may require replacing some parts or updating security systems which means more future expenses.
Although MULTIfamily homes do have their perks, there are often trade-offs for getting a larger unit at lower rent. Maybe it's location, renovations needed, or extra space. One MULTIfamily home may have a garage, but if all of your properties are within walking distance to stores and restaurants, then you probably won't need a multi-vehicle garage.
Rent MULTIfamily units as soon as possible: This sounds like bad advice because MULTIfamily housing doesn't always "rent itself," but if you can rent MULTIfamily properties within the first month after buying them it will dramatically increase your chances of turning a profit. The more practice you have finding great deals on the market and renting them out quickly, the better off you'll be when looking at MULTIfamily property investment opportunities.
Identify MULTIfamily rentals from current owners in Mesa, Arizona: When you start looking at MULTIfamily homes for sale, try to find homeowners who are selling because they have properties that aren't being rented out. They may be willing to sell their home cheaper or at a discounted price if you'll agree to take over their rental payments and start renting it out. One example might be a MULTIfamily duplex with one unit leasing for $700/month while the other is empty... maybe the owner could get 50% off his mortgage by selling it all together.
The Mesa investment property market is a great opportunity for investors to earn money. But buying the right one requires research, planning and patience. If you're considering investing in this area, make sure you do your homework! If you're ready to dive into the world of real estate investment or you're looking to expand your current collection of properties, this blog has hopefully provided you with some helpful and informative information to get the process started!