Investing in a Multi-Family  Property: What You Should Know

Investing in a multi-family  property can be an excellent investment. Multi-family units are appealing to buy because of the higher rental rates and the potential for appreciation. 

Before you buy, there are some things you should know about this type of housing unit. Below, we have outlined what makes multi-unit housing appealing and the pros and cons of investing in these properties!

What is a Multi-Family Property?

A multi-family residential property is a building that contains two or more apartments, condos, townhouses, and similar buildings. The properties can range from high-rise buildings to low-rise buildings. The units share a common area and usually have an elevator, storage space, laundry facilities, and parking.

Managing a multi-family residential property can be done by the owner or via the help of property management. Either way that you choose to manage your multi-family property, many benefits can come with this investment style.

Why You Should Buy Multi-Family Housing

1. Multi-family housing can generate more income.

With two or more rental units, there are often multiple sources of income from one property. This means that an investor does not have to buy as many properties in order to diversify their investments and generate a good return on investment. Not only do the rents typically cover mortgage payments, but they also provide an opportunity for profit.

2. The buy-to-rent ratio may be cheaper than other commercial properties.

Multi-unit housing is a great investment because it can allow investors to buy more property for less money. The buy-to-rent ratios are typically lower in multi-family properties, meaning that investors will not need as much income from other sources to cover their mortgage payments and generate a profit.

3. Multi-family homes appreciate.

Multi-unit housing is appealing to buy because of the potential for appreciation in this type of property. In some areas, properties can appreciate up to 20% per year if they are well managed and marketed correctly. 

4. The rise in population in urban areas.

People are moving to cities at an increasing rate, and the demand for multi-unit housing is growing as well. This means that there will likely be a higher buy/rent ratio in this type of property in the coming years.

5. More millennials are renting than buying.

Due to the financial strain of student loan debt and other issues, many millennials and Gen Z populations are choosing to rent rather than buy a home. This creates an opportunity for property investors to buy properties and rent out the units. 

The Potential Challenges of Multi-Family Property Investments

As you can see, there are plenty of benefits that come with investing in multi-family housing. But there are also some potential challenges associated with this type of investment.

• Potential for Inconsistent Renting

When you are leasing units to families, you may find that you deal with more inconsistent streams of income. Rather than leasing a commercial property to a long-term company, you are renting to people who may only be there for six months or less.

• Maintenance Issues

Another potential challenge of investing in multi-family housing is that it will require more time and money for maintenance. When there are more units than an individual, the costs associated with repairs or renovations can increase because you need to hire a contractor specializing in this type of work.

How to Start Investing in Multi-Family Residential Properties

If you’re interested in investing in a multi-unit housing property, it’s important to do your research first. Here are a few steps you should take to start planning for your next multi-family investment:

• Find a Multi-Family Property to Purchase

Your first step is to do your research to find the potential properties on the market. You should look for properties that are in a location where people want to buy. You can also consider the school district and amenities nearby, such as grocery stores or banks.

Here are a few things to look for in a great multi-family residential investment:

• Low buy to rent ratios
• Properties that have the potential for appreciation in value
• Properties that appear to be in good condition
• Units that already have tenants who pay on time and are reliable

• Look at Comparable Properties

Once you find the property, research other comparable properties in the area to determine what they sold for and how much rent is charged on those buildings. This will help you choose the buy-to-rent ratio of your potential property compared to those around you. 

• Consider Future Development in the Area 

You should also consider future development in the area of your property. In some areas, you may find that a developer is coming to purchase land or a building around yours, affecting its value.

• Evaluate and Determine What Your Return on Investment Will Be 

Once you have done this research, it’s essential to evaluate all of the information you’ve gathered to decide what return on investment might be possible if you buy the building. It’s also important to take into consideration any potential challenges with investing in multi-unit housing properties.

• Work with a Professional Real Estate Agent

If you buy the building, it is a good idea to work with an agent who has experience in multi-unit housing. They can help you find and buy properties that will provide long-term gains for your investment portfolio.

• Consider this Type of Property as a Long Term Investment

When buying a property, consider investing in this type of property as a long-term investment. You may not make any money on the buy, but you could see steady returns over time from rent and appreciation in value.

Tips to Keep Your Tenants Satisfied

The key to success with multi-family residential units is to find tenants that will be reliable. Here are a few tips to keep your tenants satisfied:

• Offer Tenants a Move-In Package

Offer a move-in package to your tenants. This will help them feel comfortable in their new home, and it can also save you the time of having to find furniture for them or showing them how everything works in the unit.

• Provide Services for Utilities

Look at what services your tenants use most often, then offer those as part of their rent or give them an incentive to use them.

• Provide Amenities for Tenants 

Amenities are a great way to find and keep satisfied tenants. One example is an on-site pool, which can be a great selling point for tenants.

In some cases, you may find that tenants need storage spaces in their units and are willing to pay extra if they can get the space. If you find that this is the case, consider adding a storage unit to each building.

• Protect Your Investment with Insurance Coverage 

It is important to protect your investment by purchasing insurance coverage on any property you are buying. This may include income replacement if a situation arises that causes tenants to stop paying rent consistently. 

• Handle Maintenance Issues Quickly

If you notice a problem with the property, make sure to fix it quickly. If your tenants start noticing problems and can point out specific issues, they may be less likely to stay in their unit or recommend it as an investment opportunity for others.

Potential maintenance issues may include:

• HVAC Issues
• Electrical Issues
• Plumbing Problems 
• Mold or Mildew in the Bathroom
• Improper Lighting in a Hallway
• Landscaping

Find Your Next Multi-Family Property with Josh & Jolene Baijot Den Finder

Investing in a multi-family property can be a great financial move for those who are ready to take the next step in their real estate investment portfolio.

If you decide to buy a building, it is good to work with an agent who has experience in multi-unit housing. They can help you find and buy properties that will provide long-term gains for your investment portfolio. 

Hi! We’re Josh and  Jolene Baijot, the creators of this website. We’re also Commercial Real Estate Agents in Washington State. Thank you for taking the time to read this blog post. We appreciate your time spent on this site. You can connect with us on Facebook, Instagram, or contact us through this website.  

 

 

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