Have you ever thought about investing in a multifamily property? If so, you probably have thought that owning one would be beneficial and keep the money constantly coming in. This can be very true but what many don’t realize is that these properties take a lot of time, energy, and well, sanity. Here are a few pros and cons that can help guide you in making the right decision to invest in one or not!
More Cash Flow! This is what usually entices people about wanting to invest in a multifamily, rather than a single family home. Plain and simple, more people are paying you each month to live in your property so that’s ultimately more money in your pocket each month. Imagine charging rent to one person, then doubling, tripling, and even quadrupling that number. That’s a lot of profit.
Everything is in one area. Instead of having numerous single family properties to worry about, with a multifamily your essentially only worrying about one property as a whole. One lawn. One roof. Possibly one water unit or HVAC unit. One property to drive to when something has gone wrong or needs to be repaired. This can not only save you time, but a lot of money as well.
Multifamilies are rarely vacant. Unlike single family properties that can sit for awhile waiting for tenants to move in, multifamily properties are very high in demand and will almost always be filled up right away. This obviously means more cash flowing in for you and you don’t have to worry about theft or vandalism being a problem!
Easy to find tenants. If you have a decent property in a good area, you shouldn’t have any problems finding tenants. There are many websites nowadays that allow you to market your property and let hundreds, if not thousands of people know you’re looking for tenants. You’ll be receiving calls in no time.
You could live in one of the units. Apparently, you can get similar types of loans for smaller multifamily buildings (duplexes, triplexes, and quadplexes) as you can for single family dwellings. If you live in one of these units, you can count the rental income from other units on your loan application, helping you acquire the property and save.
Harder to finance. Multifamily properties are a lot different than single family properties when it comes to financing. If the property has 5 or more units, it can be even more difficult to finance. Usually, larger down payments are required and interest rates are much higher. In many cases, loan terms are shorter and they usually include a balloon payment.
May be difficult to sell. There are way more buyers looking to invest in single family properties rather than multifamily. Typically, investors looking for deals are the ones that show the most interest in buying multifamily homes. It is probably a good idea not to get too excited about the profit you’ll be making on one of these properties when you sell it.
More people problems. With more people, potentially comes more problems and those people will be coming to YOU to fix those problems. Your tenants may not get along or they may think their neighbors make too much noise. The A/C or refrigerator may go out and they need it fixed RIGHT NOW. There are endless things that can go wrong and with that being said, be expecting your phone to blow up with these issues.
Management might need to be hired. Depending on how many properties and tenants you have, you may want to think twice about having to take full responsibility for handling every single one of them. Everything from being an accountant, to a contractor, law enforcement office, and psychologist are things that you need to consider when getting into multifamily real estate investment. You never know what could happen!
Depending on your financial situation, the market, and your experience with running a business, it can very well be a good or bad idea to take on these responsibilities. If you feel like you can make it happen, it is highly recommended to start with one duplex then maybe work your way up to a triplex or quadplex. Starting small will let you know if it’s a good idea to continue investing in more multifamily properties! Hope this article helped!