Any residence with two or more units in the same building is referred to as a multi-family property or multi-dwelling unit (MDU). This kind of home comes in various structures, including the,
Finding An Inexpensive MDU For Sale: 7 Proven Methods
Dated: July 16 2020
Any residence with two or more units in the same building is referred to as a multi-family property or multi-dwelling unit (MDU). This kind of home comes in various structures, including the duplexes, condos, townhouses, among others. Within each unit, there will be a living space, kitchen, and bathroom.
However, before we proceed into the reliable means of finding inexpensive multi-family homes for sale, let’s shed light on some reasons why you should invest in multi-family real estate.
They are as follows:
Excellent Return On Investment: in contrast to the single-family homes that generate a monthly rental revenue, MDU investment is known to offer several lines of monthly income.
Lesser risk: Once a single-family property is vacant, it translates to a complete loss of income. But, considering that multi-family property has several units, the risk of experiencing total loss becomes less.
Scalability: With ease, real estate investors can develop their portfolio by purchasing a multi-family property, rather than a single unit of home at a time.
Cost and Time saving: Compared to the cost of purchasing 20 single-family homes, the budget needed to acquire 20-unit MDU is less costly. Aside from the lesser cost of purchase, investors will also spend less for other expenses such as property manager, handyman, attorney, or leasing agent as they will need only one – and not 20. Also, if you are the type who doesn’t have much time to spend, MDU will come handy as it is less time-demanding.
Dual Usage: Whether you intend to put your housing properties into commercial use or residential purpose, the multi-family property will serve both needs effectively. You may set up the ground floor for business owners such as pharmacists, mini-market entrepreneurs, barbers, among others while the upper floors are designed to accommodate the residential occupants.
Housing Hacking: MDU properties enable you to live in one of the units, as well as rent the other units out. While you live for free in a unit, you will also be generating passive income monthly. Nevertheless, it is worth noting that although MDU offers a plethora of benefits to investors, it is quite expensive to purchase. Hence, real estate investors need to know the ways of purchasing inexpensive multi-family properties for sale.
Below, we have explained some reliable methods you can leverage:
1. A Fixer-Upper
In most cases, since cheap real estate usually needs serious renovation work, they are often sold at a low cost. Most investors will be able to purchase such properties, renovate them, then resell at a higher price. But, be informed that many complications and risks usually characterize such fixers; hence, it can be quite challenging to finance. Always remember the following tips while buying such an MDU property for sale: Get the services of a professional home inspector to assess the fixer-upper on your behalf. Consult a registered contractor to find out the estimate of renovation and repair costs. Cheap multi-family properties for sales with only “cosmetic fixes” are the most advisable. If possible, get a rehab loan that comes with renovation costs.
2. Consider Areas Beyond the City
A proven method of getting a cheap MDU property for sale is by considering areas beyond the cities and the busy suburbs. In fact, you may find some really inexpensive properties in locations which are about one- or two-hours’ drive from the main city. As a savvy investor, focus on areas outside the East and West coast to find the most profitable multi-family property investments. Affordable real estate investments are usually found in the South and Midwest regions.
3. Check for “For Sale by Owner” Tags
While trying to boycott the cost of listing and advertising, the “For Sale by Owner” tag is usually placed by the homeowners on the front yard to get the attention of buyers. Mostly, such sellers hardly know the true worth of their properties. Consequently, they tend to sell their properties at a lower price than other properties within the same location.
4. Consider several properties
To get the best investment deals for multi-family properties, you have to find dozens of properties and assess them properly. Advisably, you can attend different open houses to understand the local market better. Additionally, endeavor to arrange a meeting with a local realtor to visit many multi-family properties for sale. Once you are free, you can drive around the neighborhood in search of “For Sale by Owner” tags. In this way, you will have a better chance of getting an excellent deal.
5. Develop Automatic Notifications
This approach works effectively for those who are newbies in finding the MDU properties for sale. By creating automatic notifications, you will be the first – or among the first – to submit an offer for cheap multi-family property for sale. You may consult real estate agents to help you set up such alerts. Ensure that the notification is set up only to alert you about MDU properties for sale.
6. Search for Real Estate Owned (REO) properties
When a financial institution decides to foreclose a property and place it on “for sale,” such property is considered as a real estate owned (REO) property. In most cases, this property may have been abandoned for several years, and therefore, it may require some renovations. Compared to homeowners, banks don’t get emotionally attached to properties; for this reason, it is always quite easy to conduct price negotiation and get an incredible deal on MDU foreclosures.
7. Collaborate with a Wholesaler
Lastly, working with a wholesaler is a rewarding method of getting inexpensive MDU properties for sale. Ideally, a wholesaler is someone looking for an incredible deal; then they will give the right to purchase the property to a real estate investor having a lesser mark-up. Due to the astonishing negotiation skills of the wholesalers, buyers will benefit from excellent savings on their investment properties. Nevertheless, be informed that the majority of wholesalers only work with buyers who have the cash to purchase. Aside from online forums, you can find wholesalers by contacting info on any signs that read “I will buy your house for cash” in any area.
As a smart investor, endeavor to conduct thorough research on prospective location before purchasing a cheap multi-family home for sale. Check for amenities, school ratings, close by businesses, public transportations, walk score, the condition of other properties within the area before settling for an MDU property. To do this, you can perform online searches, drive around the area, or request for the services of a local agent.
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