Multi-Family investments are a wonderful way to create an additional income stream. As with any investment, there are pros and cons you should be aware of. In this Blog post, we will review the pros and cons of multi-family investments. The more you know about what to watch out for, the better decision you will make when it comes to multi-family investing.
When you purchase a single family home and rent it, you have one check coming in each month. If you were to buy a smaller, duplex or apartment building for a slightly higher cost, you can almost ensure you will never have a 0% occupancy rate. You will always have some sort of income coming in while you work to fill all of the units.
More “doors” also means more checks coming in each month. And who doesn’t want more checks?
Typically your costs are lower when you have multiple “doors” or units. Making a major repair to a house with one tenant will have less value than the same repair on an apartment building. For example, fixing a roof can affect multiple tenants, whereas the same repair, at the same price, will only affect one single family renter. When you have several single-family homes, you can be making major repairs all year long!
One Stop Shop
If you own one building, you can pick up rent checks and make repairs all in one spot. If you are dealing with multiple single-family homes, you could end up driving all over town. Keeping a nice sized investment property near your home can be a lower maintenance way to make your multi-family investment.
More Tenants, More Problems
Your phone will ring more. You’ll have more rent checks to chase down, more neighbor disputes to mediate, and more small repairs to make. (More sinks to clog, more windows to break, more tiles to crack.) You must figure out if the additional hassles are worth your time and energy!
Statistically, turnover is much higher. This means that you will be paying more in cleaning fees, new carpet, new locks, paint and general fix-ups. You will have to spend more time interviewing and screening tenants and are more likely to have to deal with the eviction process.
Harder to Get Financing
Banks don’t lend in the same manner for multi-family homes. Using traditional financing isn’t usually an option unless you plan on occupying one of the units in the building you purchase. Investors often secure private loans or are able to pay in cash.
Tougher to Resell
Reselling a single home will be much easier than selling an apartment building. There is a much larger market for a single family home then there would be for an apartment building. Fewer people out there are looking to invest. You will need to have proof of the income the property generates in order to be able to find a buyer at the price you want. Make sure you always keep proper records showing what a great value your property is!
Are you interested in investing in a single or multi-family property? We can help you with all the in’s and out’s so you can make the purchase that is right for you! Let us know what you are looking for!
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Single and multifamily is our specialty, and Sol Mar REI is ready to help you buy now!