Key Questions to Ask When Buying a Multifamily in NYC
By Thomas Kutzman on January 14, 2024
If you’re thinking about buying a multifamily property or a multi family home in NYC, there are a few key things you’ll want to keep in mind. By asking the right questions, you can ensure that you’re making a smart investment that will generate consistent income for years to come.
Below, the team from Prevu Real Estate highlight the most important questions you should ask when investing in a multifamily in NYC.
What is the current occupancy rate and how long has it been that way?
Occupancy rates are one of the most important factors to consider when purchasing a multifamily property in NYC. The occupancy rate will directly impact the rental income that the property generates.
In addition, a higher occupancy rate often indicates that the units are in better condition and that the tenants are more stable. As a result, it is essential to know the occupancy rate of a multifamily property before making an offer.
By doing so, you can be sure that you are getting a property that will generate the income you need to achieve your desired cap rate.
What are the current rents on each unit?
Any good real estate investor in NYC knows that it's important to stay up to date on current rent prices in the area. After all, rent will determine the potential cash flow of a multifamily property. That's why it's essential to take a close look at rent rolls when considering a new investment.
Rent rolls provide detailed information on the rents being charged for each rental unit in a multifamily property. This data can be compared to average rents in the neighborhood to analyze how the property compares. By understanding current rent prices, you can make sure that your rental rates are in line with the market, as well as spot opportunities to renovate or raise rents.
Can the current owner provide copies of all leases?
When diligencing a multifamily property, potential buyers will often request copies of the current leases. The owner or current operator of the property should be able to provide these copies, as they are typically required to keep them on file.
Providing potential buyers with copies of the current leases helps to create transparency and allows them to see the terms that current tenants are agreeing to. It also gives them a chance to review the lease terms and make sure that they are agreeable with any potential purchase.
Ultimately, providing current leases is part of due diligence when selling a multifamily property and helps to create a smooth transaction for all parties involved.
How often do tenants move out/in of rental units, and why?
One of the most important things for landlords to understand is how frequently tenants turnover. This can be a big factor in the stability of rents and the condition of the apartment.
If tenants are constantly coming and going, there will be more wear and tear on the apartment and it will be harder to keep up with repairs. On the other hand, if tenants stay for long periods of time, it will be easier to maintain the apartment and keep rents stable.
Of course, there are many factors that go into tenants' decisions to stay or move, but understanding turnover rates can be helpful in planning for the future.
Are there any known environmental hazards on or near the property?
Landlords play an important role in providing a safe environment for renters. By ensuring that their rental properties are free of lead paint, asbestos, or any other hazards, they can help to reduce the risk of exposure to these harmful substances.
In addition, by regularly reviewing their rental units and addressing any safety concerns, landlords can help to ensure that their tenants have a safe and healthy place to live.
When considering an investment in a multifamily property, aspiring landlords should consider hiring a licensed home inspector to uncover any potential hazards before proceeding with the purchase.
What kind of maintenance has been done on the property in recent years and what are the maintenance costs?
Seasoned investors will tell you how important it is to ask about recent repairs that have been carried out. This will give you an indication of the condition of the property and whether any major work will need to be done in the near future.
Roofs, heating systems, electric systems, doors and windows are all key areas to look at, as any damage to these areas can be costly to repair compared to cosmetic items.
By asking about recent repairs, you will be able to get a better estimate of the future repair costs of the property. This information can then be used to help you decide whether the property is a good investment.
Have any legal disputes arisen between any of the owners or tenants?
When you are considering an investment property with multiple units, it is important to ask if there have been any legal disputes between current tenants and the owner.
Even if the owner has not been involved in the dispute themselves, legal risks can still be associated with the property. For example, if a tenant has been involved in a dispute with a previous landlord, they may be more likely to take legal action against the current owner or you in the future.
Additionally, if there are multiple tenants in a property, there is a greater risk that one of them may bring a legal dispute. By asking about legal disputes, you can get a better understanding of the legal risks you may face in the future.
What are the average monthly utility bills for the property?
When considering the purchase of a multi unit building, it is important to ask about the utility bills. Water, electric, and gas are all necessary expenses that will have to be covered each month.
By getting an estimate of these costs, you can better evaluate the potential income of the property. In addition, inquiring about utility bills can help you to understand the overall maintenance costs of the property, and how utility metering of each unit is configured.
Taking these factors into consideration, you can make a more informed decision about whether or not to purchase a particular multifamily property.
Can I get a commission rebate when buying on a multifamily property?
The answer is yes! Savvy investors are aware that they are allowed to receive a commission rebate from their real estate broker. This money saving concept enables a buyer’s agent to give a buyer a portion of the commission they get for representing them.
Not all real estate brokers offer them, that is why aspiring landlords need to ask about them before hiring an agent to represent them on their multifamily purchase. A commission rebate makes your purchase more affordable and gives you extra funds if you are planning to renovate or just want a financial cushion for future repairs.
Prevu offers the largest commission rebate in NYC - up to 1.5% of your purchase price. And given the fact that multifamily properties have higher price tags than apartments or single-family houses, the savings can add up quickly.
