Multifamily income vs. expenses

[Anthony Bauman]

Hi!

I'm 19 and new to real estate. I was thinking about investing in a multifamily house in New Jersey or Chicago but I found myself with a few questions and I was wondering if anyone could help me :)

I was looking for a triplex or a fourplex, but I'm not quite sure about what my expenses will be. I know that I'll have property taxes, insurance, maintenance, utilities (energy, water). My first question is: in utilities, since I'm not living in this property, why would I have to pay for energy or water?

Another one would be: since I have the money and don't need a loan, mortgage it's not in my expenses, but will be more profitable to buy a triplex or fourplex now and enjoy not having to pay mortgage or use this money as a down payment to a bigger property with more units?

[Crystal Smith]

Originally posted by @Anthony Bauman:

I was looking for a triplex or a fourplex, but I'm not quite sure about what my expenses will be. I know that I'll have property taxes, insurance, maintenance, utilities (energy, water). My first question is: in utilities, since I'm not living in this property, why would I have to pay for energy or water?

Another one would be: since I have the money and don't need a loan, mortgage it's not in my expenses, but will be more profitable to buy a triplex or fourplex now and enjoy not having to pay mortgage or use this money as a down payment to a bigger property with more units?

 In many municipalities, including Chicago, the property owner is responsible for the water bill.  You can, however, set up a lease with your tenant where they are responsible for water but if the bill's not paid the water department will go after the property owner, not the tenants.  

Regarding the energy bills (electric & gas); it depends on what kind of building you purchase.  Many old multifamily buildings in Chicago have one boiler to heat the entire building.  This means the property owner pays the bill in lieu of the tenants.  When we purchase these type of buildings we put together a plan to convert the building from an individual boiler to individual heating & cooling that the tenants are responsible for & we're only responsible for heating/cooling common areas. 

Regarding paying w/ cash or using a mortgage.  The answer is where will you get more cash flow?