More real estate investors have been asking about the pros versus cons of multi-family real estate investing. Is it far more headache than it’s worth or could it actually be more profitable than trying to convert REOs to rentals?
So what are the real pros and cons of multi-family property real estate investing and how do they compare with single family homes?
4 Pros of Multifamily Investment Properties
1. Cost Per Door
Perhaps the biggest advantage of multifamily properties for real estate investing is the lower ‘cost per door’ or unit when compared to single family homes, not to mention the amount of work put in.
2. Property Management
There is no question that for most managing one building with multiple tenants is a lot easier and more cost effective than a network of individual homes. Plus, when it comes to making improvements multi-unit buildings can deliver a higher ROI in some cases.
3. Diversity
Having numerous tenants under one roof makes it unlikely there will ever be a dry month of rents coming in.
4. Financing
Many real estate investors are unaware of how easy it actually is to get mortgage financing on a commercial property compared to single family homes. When it comes to commercial financing credit is often less of an issue and it is the income coming in that really matters.
4 Cons of Multifamily Investment Properties
1. Competition
If some real estate investors think that the residential arena is getting competitive, there is a lot more competition for far fewer multifamily properties, especially distressed ones.
2. Diversity
Unfortunately, in the reverse, putting more money into one property, even if it has many tenants puts investors at more risk from a variety of potential disasters.
3. Tenant Quality
Opting for multifamily real estate investing often means dealing with lower quality tenants. More may be charged per unit per month but there could also be more issues due to the financial strength of these renters.
4. Fewer End Buyers
Distressed multifamily properties may be in demand but there are also certainly fewer prospective buyers per property compared to single family homes or even condos.
The bottom line is that there are advantages of investing in both multifamily and single family properties. Why not experiment? If you’ve only been doing multifamily, why not try single family for a change? You might find flipping is easier and bigger checks come faster.
