Your first small multifamily deal, with real math

Start from income, not from the asking price

Collect actual rents, compare them with similar units nearby and use the lower figure. Then subtract expenses: taxes, insurance, utilities you cover, maintenance and a vacancy allowance. The remainder is the building's net operating income.

Use conservative assumptions

Many new investors underestimate repairs. Set aside a percentage of rent for maintenance and another for big-ticket items like roofs and boilers. If the deal only works with perfect occupancy, it does not work.

• Vacancy: assume at least a month a year per unit.
• Maintenance: set aside a steady percentage of rent.
• Management: price it in, even if you do the work yourself.

Financing small multifamily

Owner-occupied loans can allow lower down payments on two-to-four unit buildings if you live in one unit. Lenders may count a portion of rental income toward qualifying. Ask a lender and an agent who works with investors what applies to you.

Inspect like an owner

Hire an inspector who looks at plumbing, electrical systems and roofs, and read the leases. Talk to tenants if you can. Your agent can walk you through a stress test of the numbers before you offer.