Debunking the top 4 misconceptions about multifamily investing.
Misconception number 1: It is too expensive to invest in multifamily properties.
Purchasing multifamily properties is more expensive than buying a single-family home, however, if you invest through an investment firm like Yarusi Holdings it is not. Most of the time our minimum investment can range from $25,000 to $50,000, but most investors put in $100,000.
Yes, that might seem like a lot to some people however, let’s take a look at an example property to see what the return on investment is.
For this property example, we would hold the property for 7 years, at the 7-year mark the investor would make a profit of $130,389 plus they would get their original investment back. Thus putting $230,389 back into the bank account.
Misconception number 2: Vacancies will ruin profitability.
A multifamily property has the benefit of an income stream from multiple tenants, which can be viewed as more stable because even if one tenant leaves, the property will still be generating income from the other tenants.This misconception can be easily combated with the right property management group as well. If this is something that you are worried about, here at Yarusi Holdings we have partnered with an amazing property management group that we trust to make sure that they keep the operational cost down, rents at the market level, and vacancies minimal.
Misconceptions number 3: Financing will be challenging
When you invest with us, we take care of the loan for the property. What we do not get from the loan we capital raise for.
The funds that we get from capital raising is used for the following:
- Down payment for the loan (typically ranges between 20-35% of the purchase price)
- Renovation and capital expenditure budgets
- This will be anything that improves the property condition. This includes turning the units such as painting, new flooring, new appliances, replacing roofs, repairing HVAC, and other items.
- This budget will be created before the acquisition to get an accurate estimate for the business plan. It is based on the age and condition of the property and what renovations the operator is looking to do.
- Fees charged for putting the deal together
- Acquisition: This is paid out upon closing and is used to compensate for the work that was put into the deal before closing such as sourcing the deal, underwriting, arranging debt and equity, etc. This typically ranges between 1-2%.
- Operating and Reserve funds
- These are also known as replacement reserves that are set aside in the budget to fund additional capital expenditures or if the budget went over. Operating reserves typically range between $250-$300 per unit and Reserve funds are typically a quarter of the yearly expenses.
Misconception number 4: The property will be too expensive to maintain.
The thought of maintaining a large property might be intimidating at first. However, when you invest with us we hire out amazing property management groups that care of all operations of the property including, renting out the units, marketing, landscaping, turns, etc.
Investing in Multifamily properties might seem daunting at first however, here at Yarusi Holdings we are here to help you feel comfortable and confident about where your money is going to be used.