Some first-time investors have taken the risk of going the way of multi family (MF) investing. Multi family residential or multi-dwelling unit and MF offices are example of MF investments. Many grizzled veterans in the business of investing regard multi-family investments as way better than single-family properties.
Any investment property that houses two or more families is considered multi family. Examples of MF investment properties are apartment buildings, duplex, townhouses, condominiums and apartment complexes, which can have up to a hundred tenant families. Buildings with residential and commercial spaces also qualify as MF properties.
Advantages of multi family over single family investments
Multi family investing means faster cash flow. More families are paying their rent therefore more money is coming in. Generally, income generated from MF homes is higher as compared to single homes. As a result, multi family investing will pay off your mortgages faster and in the end, will make you richer as long as you play your cards right.
There is less risk of vacancy and its ensuing costs. With more units available for rent, there is less risk of getting zero tenants and zero earnings. Imagine having a single-family property and your tenant decides to leave. You’ll be burdened with having an investment that does not earn a single cent. Instead, you will be left with an empty house or office that generates expenses like taxes, mortgages and maintenance. Therefore, a four-family unit housing two tenants is still better than a single one with no one paying you anything.
Maintenance and utility expenses are greatly minimized. Having a multi family property, as compared to owning a number of single-family ones, will guarantee lesser expenses for maintenance and utility. In a MF home, you are basically maintaining one huge property. So instead of fixing four roofs of four single-family properties, you will only need to spend for one roof of one multi family home that has four tenants. The same goes with utility bills covering things like security, watering the lawn, powering the lights in common areas, among others.
For people who have a rather small amount of money for investing, buying a two- to four-unit apartment building is a wise thing to do. Generally, single homes are only slightly cheaper than two-family properties. But if you look at it closer you are actually paying less for each unit in your MF property. Say, a single-family property sells for 200 thousand dollars while a three-family apartment is available for 500 thousand dollars. If you compute for it, each unit in the three-family apartment costs around 167 thousand dollars only. Additionally, a small apartment building with at most four units will not garner a commercial status. Having a commercial status means higher mortgage rates, insurance fees and taxes. Therefore, small-time investors are better off doing multi family investing multi-on two- to four-family units than going the single-family route.
Just like any other investment you want to pursue, MF investing takes a lot of research and involves risks. But, if you do things correctly, the rewards are aplenty. So before you put your hard-earned money on the table; ask around, get advice from professionals, and think things thoroughly.