First lets look at the advantages to buying a multi unit property

Cost per Unit: multi family housing is generally cheaper. The cost of a duplex is less than the cost of two homes. Less debt and therefore less risk also means you have the potential to own more of your property than the bank.

Vacancy Rate

By definition, a multi family property is never 100% vacant, meaning there are always some renters helping to pay expenses. What happens if you lose your tenant in your single family house? You lose all of your income and you have to pay the mortgage out of your savings. If you lose a tenant in a three family house, you’ve only lost one third of your income. The other two units will help cover your mortgage until you rent the vacancy. One reason why owning small apartment houses is smarter that owning single family homes.

Easier to Finance

Get financing more easily. Money for commercial units was available even during the recent mortgage freeze. For a few weeks in late August to Early of 2007. I think that this is due to less risk, because multi family is less expensive per unit and because there are always some tenants helping to cover costs.

Financing is more available for multi family because investment property can be analyzed using financial ratios like cash flow or cap rates. Lenders love to be able to assess the investment value of a property. You can price a property according to the return on cash flow or gross rents and create benchmarks. Its not emotional.

Maintenance

Although, you may have more toilet flapper problems to deal with, because you have more toilets, there is still only one roof and one foundation. This remains the same whether you have two unit duplex or a ten unit property. Costs can be spread out and the cash flow of a well run building will help support maintenance much easier than if it were a single family home with only you paying the bills.

The Market Today

1. We have a housing recession, mainly in the single family home sector. Sales are slowing and will probably get worse before they get better. Rental rates, however are booming. There are a few reasons why: For a start, when homes become to pricey, the monthly carrying cost of ownership starts to look very unfavorable compared to a monthly rental. When mortgage rates were very low, the monthly mortgage was often less or equal to a rental. That made home buying very attractive but the opposite is true today.

2. Mortgage money may be easier to get for a well priced apartment building, because its an investment and more transparent than buying a single family home because the cash flow is a good measure of the true value of a property.

1031 Tax Advantages

Rental houses or business property (but not your personal residence) can be swapped, tax-deferred for other investment real estate. IRS Section 1031 makes it possible to exchange and even trade up from a small rental property into a larger investment property investment property worth far more, with little or no erosion of capital gains because its possible to avoid the capital gains tax. The Government will effectively let you use the tax owed to them towards a greater down. Now 1031 exchanges are complicated and you should always have a qualified advisor before attempting one of these.

Disadvantages

Time Consuming: Multi family ownership is a job. It needs management skills such as dealing with people, tenant screening and all the necessary business skills and legal issues make it difficult. You need to assess your own skills and see if you have the desire to manage people and property. It can be very time consuming. A larger property, say 10 units or more may allow you to hire and actually be easier that 2 or 3 units, where there isnt enough coming in for an owner to hire more than necessary.

Equity Appreciation: Multi Family doesn’t appreciate in market value as rapidly as single-family house investments. The reason is apartments are valued by their “cap rate” or net operating income divided by the property value. For example, a small apartment building producing $10,000 annual net operating income (excluding mortgage payments) and an asking price of $100,000 for the property equates to a10 percent “cap rate.” or a 10% rate of return.

Rent Control: The laws designed to protect the more vulnerable puts a limit on the rental increases allowed in any given year. Therefore some properties should be bought only if an equity increase is in the cards. The one work around is when a rent controlled unit becomes vacant. Then the unit can be brought up to market rent. If a tenant has been there for many years that can be a significant increase.

Thanks for Reading

Howard Bell for http://www.yourpropertypath.com

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The Internet has revolutionized the whole method of operation of what is well put as ‘finding diamonds in the rough’. Useful legal information, photos, prices and descriptions related to properties located miles away or within your locality can be easily found on net. Be prepared for payment of realtor fees if you’re limiting yourself to ads of ‘For Sale By Owner’ (FSBO) on Windows Classifieds, Google Base or eBay.

Visiting estate agent or realtor businesses is always a good approach. Obtaining an MLS (multiple listing service) provides you with all the information they receive if its within your affordable limit. Even if you do come up with that kind of cash, a special license is needed in some areas.

Don’t ever cut back on legwork even if you find a property of great value on the net. Visiting the property you’re interested in and the area surrounding it is the only way to arrive at a proper judgment properly. There is no shortcut around it. Make sure that the neighborhood isn’t such that might decrease the property value dramatically in future. To make sure speak with the neighbors and look for rent, FSBO signs when you’re driving around.

It’s better to do your property evaluation of Alicante homes in the bad weather conditions in Alicante like if it’s raining you can find out if there’s a leaking roof. Its true that the idea is not a really comfortable one but think of it this way. Since your competitor won’t check during bad weather condition so it will give you an added edge and will put you ahead. You have power when you have knowledge and information.

A deal of contingent nature can be struck once the informal inspection is complete. Here the meaning of ‘contingent’ is based on a satisfactory inspection of professional nature. Even if you have to pay more than the normal rate its better to hire one who’s reliable and knows what’s he doing. If you continue to use them in the future regularly the reward you will enjoy will be many times over the cost you have to incur.

If you have interest and can give some time, try learning the craft. At least enough to make certain that the inspection is done honestly although most are done that way.

The report should be carefully reviewed. Record every minor and major flaw although everything need not be a 100%. Heating systems or non-operative air conditioning, damaged floors or walls, stained carpets, leaking roofs or plumbing are some examples. Take special note of stagnant water near the foundation or in the basement.

Keep in mind that everything is negotiable as long as you’re realistic. There is no hard and fast rule regarding who would ultimately pay the repairs that is anyone actually does. You have the power as long as you have the right information. Rarely you will find properties that are perfect even the recently constructed ones. The ones that are perfect are so expensive that you might have to do away with your profit unless you’re planning to use it as a long period investment.

Being particularly passionate about Gandia, Robert Carlton has been publishing plenty of news on the topic. His abstracts on current weather in alicante can be discovered on http://www.alicante-spain.com/alicante-weather.html.