Pros & Cons of Investing in a Multi-family Property
Anyone who has been active in the real estate market for a period of time might eventually consider purchasing a multi-family unit. There are a number of different types of multi-family units you might want to invest in, ranging from a simple duplex to an entire apartment complex which could contain 50 different units. While you would have the tremendous advantage of receiving multiple incomes from tenants, you would also have multiple tenants to keep happy. As you might guess from this, there are some pros and cons to investing in multi-family units, and some of these are described below.
Pro – fewer vacancies
When you own a multi-family dwelling, it will probably be unusual for you to have all of them vacant at the same time, and you should make a point of staggering the lease expiration dates throughout the year so as to avoid that very scenario. Apartments are generally more appealing to the masses than are single-family homes, because they represent less of a commitment, and are generally more affordable for most people. Since you’ll have multiple tenants in your complex, you’ll be receiving multiple sources of income, and that of course is one of the greatest appeals.
Pro – easier property management
Whereas you might be tempted to manage a single dwelling by yourself, when you have a large multi-family dwelling, you’re much more likely to have to enlist the services of a good property manager. Since you don’t have to take care of the place yourself, you will be free to consider your next financial move, or to consider other real estate transactions.
Pro – rental increases
It’s a known fact that turnover in apartments is much higher than it would be for houses, and this allows you the opportunity to adjust your rental fees upward more frequently. Of course, you’ll still have to stay in line with the going rate in the area, but the frequent turnover does allow you to at least keep pace with standards in the region. This can be really useful when you have to make repairs or improvements to the property, and you need to recoup that money through rental fees.
Con – maintenance
Maintenance costs can be considerable unless you have purchased a relatively new multi-family structure. With multiple tenants in your building, there will be several possible sources for requests for maintenance, all of which you will have to implement and pay for yourself.
Con – tenant disagreements
Since you have multiple tenants in your building, that means you’ll also have possibility of frequent disagreements with them. That also creates the possibility for disagreements between tenants themselves, and that’s something you may have to get involved with in order to keep the peace.
Con – property management
Unless you hire a property management team, you’ll have to do all the property management yourself. Not only will this become a constant drain on your time, but you will also undoubtedly run into a number of headaches which are both costly and sometimes difficult to solve.
Con – lack of availability
There are generally fewer investors looking to purchase a multi-family dwelling, but it’s also true that there are far fewer multi-family dwellings available for purchase. There are far more single-family homes on the market than there are apartment complexes, so you may have to spend some time and effort before actually finding a property which you really want to invest in.