Income Approach Valuation: Always calculate the property’s value based on its expected rental income. Use the income approach: estimate the annual net operating income and divide bu the market capitalization rate to assess fair market value.

The formula is: Value = NOI / Cap Rate

*NOI is calculated by subtracting the operating expenses (property tax, insurance, maintenance, repairs, utilities, etc.) from gross rental income.

Cash Flow Projections: Project monthly and annual cash flow, adjusting for vacancy rates and maintenance costs.

Vacancy Risk: Multi-family properties lower vacancy risk — when one unit is vacant, others may be able to cover expenses. Single-family homes face 100% vacancy risk if unoccupied, which can lead to periods of zero income.

Tenant Turnover & Management: Higher turnover affects cash flow. Assess the local rental market and tenant demand; multi-family properties are less impacted by a single tenant leaving.

Market Trends: Keep abreast of local real estate trends such as rental rates, population growth, and job market conditions. Properties in growing areas tend to appreciate faster and have constant tenant demand.

Capital Expenditures: Budget for major periodic expenses (roof, HVAC, plumbing, etc.) that can dramatically affect ROI.

Neighborhood Quality: Schools districts, amenities, crime rates, and proximity to employment epicenters heavily influence both rents and future appreciation.

Economic Indicators: Prefer properties in regions with positive migration patterns, stable economy, and low unemployment.

Down Payments: For single-family homes, expect 15-25% down; for multi-family, 25-30% or more, plus more complex financing requirements.

Loan Terms & Interest Rates: Explore financing options—more units often mean stricter lending standards.

Insurance & Taxes: Multi-family properties have higher insurance and tax burdens; single-family homes are lower-cost to operate.

Property Inspection: Hire professional inspectors to find hidden defects. Don’t self-inspect, especially in multi-family properties.

Title & Zoning: Confirm property title is clear, and verify compliance with zoning laws and local ordinances.

Lease Review: Ensuring existing leases are transferable, collect security deposits records, and review tenant payment histories.

Economies of Scale: Multi-family allows you to grow your portfolio faster since you manage several units at one location. Single-family homes require more hands-on management but offer easier geographic diversification and are often more turnkey.

Appreciation vs. Income: Single-family homes often appreciate faster; multi-family excels at stable, scalable income. Identify which benefits align with your financial goals.

Professional Management: Decide if you will self-manage or hire a property manager; multi-family often requires professional help due to higher complexity.