You might have thought of buying multi family homes for investment. That is, indeed, a great idea. However, before getting into action, here are some things you need to know about investing in multi family homes.
Investing in multi family homes is a very lucrative investment strategy. However, you should know, that, as any other investment strategy, it comes with some advantages and disadvantages. Of course, it all depends on your circumstances as well as planning and management skills, so you do not have to worry too much.
So, if you are interested in buying multi family homes for investment, take a minute to read this article. We are going to tell you the most important aspects of investing in multi family homes. First, we are going to talk about the advantages that make it one of the best investment strategies for you. Then, we are going to talk about some aspects that you should take into consideration before getting into it.
Related: What Is the Best Type of Investment Property in the Real Estate Market?
First, the pros of buying multi family homes for investment:
They are easier to finance
If you are considering buying multi family homes for investment financed with a loan, then, yes, it is easier. You will have various loan and financing options with less down payments. Loaners treat multi family homes as a better guarantee than other types of investment properties. Keep in mind that it is also easier for you to get one loan that covers multiple investment units in one location. You will not have to take multiple loans to finance multiple properties in different locations. Therefore, it is more convenient in terms of getting the financing needed for buying the property.
Property management
Buying multi family homes for investment will make it more convenient for you as the landlord to manage the investment property. If you choose to manage the property yourself, it would be easier for you to manage multiple units in one building. Property management is not so easy, especially, if you have a few properties in different locations. Property management comes with many tasks that you will have to deal with including property maintenance, collecting rents from tenants, dealing with rental arrears, and dealing with your tenants’ complaints.
On the other hand, if you choose to hire a professional property management company, it will cost you less with a multi family home. Think of it this way, the property management company is going to charge you for every property you entrust to them. However, with multi family homes, the charges are going to be less because they are managing one property that has multiple units, which reduces your expenses.
Related: Should Investors Do Their Own Real Estate Property Management?
Less competition
Buying multi family homes for investment is associated with less competition compared to single family homes, for example. Fewer people choose to invest in multi family homes due to personal considerations as well as the fact that there are fewer multi family homes compared to other types of properties. So, why not seize the opportunity and invest in this type of property?
More income!
What could be a reason for you to invest in real estate other than making money? Sure enough, the rule is, the more the better. Well, we have got some good news for you. That is exactly what you get for buying multi family homes for investment. Multi family homes generate more cash flow each month. This will greatly help you in case you financed your investment with a mortgage. Moreover, you will not have to worry about vacancies. It is very unlikely to get 100% vacancy rates in multi family homes investments. They are highly demanded, which brings about decent occupancy rates.
Insurance
Property insurance might be a whole different level of pain for real estate investors. It is indeed a lot of work which makes it the least favorite part of the business. However, buying multi family homes for investment will save you the pain of getting multiple insurance policies for multiple properties, which means one insurance policy for multiple units at the same location.
Second, what to keep in mind when buying multi family homes for investment:
Multi family homes cost more
It is only natural for multi family homes to cost more compared to other properties in the real estate market. This also means larger down payments. They also cost more in maintenance and repairs. So, you have to take that into consideration before buying multi family homes for investment. All you have to do is do the right calculations in order for you to manage your finances well, and you are good to go.
Multi family homes mean more tenants
This might not be a downside all the way. However, yes, you will have to deal with more tenants who might or might not get along well either with you or with other tenants. In case they do not get along well with each other, you might find yourself involved directly or indirectly. This also means that you will have to be willing to deal with their complaints and demands. Though this isn’t always the case, it still is something to consider.
Related: 8 Types of Tenants to Beware of When You Rent Out Your Property
It might get complicated
Other than dealing with multiple tenants, buying multi family homes for investment means that you will have to deal with multiple housing units at the same time. Managing one or two housing units is easy. However, if you have a twenty unit building, that might not be the case unless you have dedicated all your time to it. So, consider the efforts you will have to put in this and make your real estate investment decision based on that.
Government regulations
You must know that buying multi family homes for investment and the process of raising the money to do so is restricted by completely different regulations. You will have to look at what you can and cannot do in that case. Otherwise, you will find yourself in a mountain of legal problems that you did not want in the first place.
Finally
As we have said before, investing in multi family homes is a very lucrative investment strategy. It works for everybody no matter whether a person has experience in real estate investing or is just a beginner. So, knowing the pros while taking into consideration the cons is best for you to set an action plan to achieve your goals.
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