Residential real estate is a solid investment, but it’s not without its challenges. Being an investor and a landlord are two very different things, and the investor’s mind and skillsets do not automatically translate to collecting rent, handling repairs, or settling neighborhood issues. This is compounded with owners who may be out of town or those who are buying one property at a time, trying to build a portfolio and/or flipping houses. For these reasons and the others we’ll explore below, multifamily properties are a very profitable alternative.
Maintenance Costs Are Lower
Let’s imagine you own five single-family dwellings in different parts of a mid-sized city. Now, imagine there’s a city-wide snowstorm. It’s your responsibility to remove the snow. You must get to five locations, or make arrangements for a property manager or snow removal company to do so, which becomes expensive quickly. Or, imagine a less drastic scenario: routine plumbing maintenance of a hot water heater. You’ll have to pay a plumber to visit each of your properties as needed. But how much would you save if they only had to make one annual stop at your apartment complex or multi-family dwelling?
Occupancy Risks Are Lower
If you own five houses, and a renter leaves one empty, you are eating the cost of the mortgage, utilities, and upkeep for however long it takes to find a new tenant. If you own a multifamily property, however, much of that cost will be covered by the other occupied units. Sure, your profits will take a hit, but nowhere near the cost of an empty single-family home.
Growth Is Easier
As you grow your real estate portfolio, you’ll find it’s infinitely easier to purchase additional multifamily complexes than individual houses, especially after you’ve built up a track record. Think of it this way: Let’s say you are hoping to rent ten units. If you look at houses, imagine the time it would take to inspect, negotiate, close, and renovate all of them. With a multiunit property, you go through all that once, saving time. The more you successfully do it, the easier it will also be to secure financing to grow even more.
In a typical rental home, most of the factors that allow a property to appreciate are beyond your control, if you wish to re-sell. This is not the case with multifamily properties; simple renovations or refitting make them more appealing to buyers than neighborhoods or even property taxes.