Tips for Buying & Renting Out a Multi-Family Property in Chicago

Posted by Leo Clark. on Friday, April 24th, 2020 at 12:19pm.

Chicago Multi-Family Homes For SaleA multi-family home can be a great investment to help build more income or diversify a portfolio of single-family rental homes. Determining whether the increased responsibility, liability, and capital reserve expense required to add a multi-family property is a good idea requires diligent research. The following list includes a few key tips to consider during your multi-family property purchasing process.

Live Inside One of the Property Units: If you are purchasing a building with 2-4 units, and you plan to live inside one of them, you may qualify for more favorable financing terms. This could include a lower down payment allowing you to save more upfront.

Request Detailed Financial Paperwork: A buyer of a property specifically set up to house multiple residents will certainly want to obtain income and expense statements for the current and previous years. You may also want to request any current rent rolls, service contracts, service records and any existing reports or reviews from tenants. The more data there is to review; the better position you'll be in to forecast the monthly or yearly cash flow and long term value of the property overall.

Maintain Adequate Cash Reserves: A main thing to consider is that all units in the building may not be rented 100% of the time. You want to assure you maintain enough cash to absorb those empty periods. More unexpected repairs will inevitably occur when owning a larger rental property. Keeping adequate reserves is crucial for when events like; tenants paying late, move-outs, or emergency repairs take place. A good 'rule of thumb' is to take 10% off of the top of the rental rate to prepare for unexpected market declines, vacancies, repairs, or factors. 

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