***There's More Profit in Multi-Unit Properties

For some great insights about why multi-unit properties offer great investment opportunities, I urge you to read last Friday’s post on this blog.nnBut to invest safely, you also need to be aware of the risks. If you fail to ask these questions before going into a deal, you could be making a very big mistake:nnAre all the rental units in the property legal? Have your attorney check with the municipality where the building is located to be sure that they are. If units turn out to be illegal and the city disallows them, that could damage your rent roll and turn the deal from good to bad.nnDid the previous owner obtain the required work permits? Many buildings - older converted houses especially - can be full of non-approved renovations. If these violations are discovered after you take ownership, it can cost you a fortune or make you take legal action against previous owners to recoup your losses. The best time to discover such problems is before you buy.nnIs the building really tenant-friendly? If units are not well sound-proofed, your tenant turnover will be high. Insufficient electrical power, low water pressure and parking hassles are three other things that make tenants leave as soon as their leases are up. Don’t ignore these problems because they can gnaw away at your bottom line.nnAre any lawsuits currently in progress against the previous owner? Have your attorney investigate - and make sure that he or she takes steps to protect you from being liable for injuries, property damage or other problems that might have occurred in the past.nnHow will mortgage lenders estimate your rent roll before writing you a mortgage? It is not always true that your rent estimate (“The four units in the building will rent for a total of $6,200 a month . . .”) will be accepted by lenders. Some will adjust your projected rental income by assuming that units will be vacant for a certain a percentage of the year. So talk to lenders sooner, not later, and be sure to work with one who will be on your side.nnEditor’s note: To get started investing in multi-unit properties, CLICK HERE. Trump University will be holding intensive retreats for investors in Las Vegas, Los Angeles and Orlando later this month.