Determining how to make investments in your best interests takes a lot of thought. One option that some people explore when they’re considering different investing avenues is real estate. Even within that broad category, there are different types of properties to consider.

Multi-unit residential properties are one of these. These properties include condos, townhomes, and apartments where you can purchase all the units as a single property. There are several things to consider if you’re going to invest in these because they typically require a considerable upfront investment.

Location

Location is usually the first thing people consider when they’re looking at real estate. For some, the higher rents in primary markets, such as New York or Los Angeles may be tempting to chase. It may behoove you to take a step back and realize that those primary markets are largely saturated, and you may not be able to get the deals on the property that make it feasible for an investment.

One option is to look into secondary markets, which is how real estate investors like Patrick Carroll have gotten their start so they can bypass those saturated markets. These secondary markets are still large cities, such as Atlanta and Houston. You can even go a little smaller into places like Little Rock, Ontario, or Charlotte.

Property Condition

The condition of a property is another consideration. If you’re going to need to put money up to rehab the units, be sure to include that cost when you’re trying to decide if the property is a good investment. This can become costly quickly when you’re dealing with multi-unit properties.

It’s a good idea to have the electric system and plumbing inspected before you decide on the investment. If there’s an HVAC or central air or heat, you should also have those checked. Properties may have major appliances, water heaters, and other mechanical systems, so those should all be checked, too.

The Bottom Line

You have to think carefully about a property before you take the necessary steps to purchase it. If you’re considering adding multi-unit residential properties, be sure that you ensure you can balance out the investment cost with the rent that you’ll be able to get for the area. As a general rule of thumb, plan on having 10% of units empty at any given time. While you’ll still have some income, planning for some vacancies can provide you with a bit of cushion so you aren’t severely limited by income fluctuations.