Buying a Multi-Family: The Numbers to Check First

Multi-family homes are popular with both owner-occupants and investors across Southern New England. Whether you plan to live in one unit or rent them all, the numbers have to work. Start here.

Income

Ask for the current rent roll and copies of the leases. Compare rents to similar units nearby, and note which leases are month-to-month, which are expiring, and whether any units are vacant.

Expenses

• Property taxes and insurance
• Utilities the owner pays (heat, water, sewer, common areas)
• Maintenance and repairs, plus a reserve for big items like roofs and boilers
• Vacancy and turnover costs
• Property management, if you will not self-manage

Two simple measures

Net operating income (NOI) is rental income minus operating expenses, before mortgage payments. The cap rate is NOI divided by the purchase price, a quick way to compare properties. Cash-on-cash return compares your yearly cash flow after debt payments to the cash you invested.

Financing

Loan terms, down payment requirements and rates can differ depending on whether you will live in one of the units. Talk to a lender early so you know your real budget.

Condition and compliance

Have the building inspected, and ask about the age of major systems. Older buildings can trigger extra requirements, for example lead-paint rules for rental units built before 1978, so ask what applies to the property and the town.

Wil has a strong background in multi-family and income-producing property, and we can help you run the numbers on a specific building. This article is general information, not legal, tax or financial advice.