Have you been focusing on single-family housing for your investment projects?  Why are multi-family properties worth a look for experienced real estate investors?

• Cash flow is more consistent with multi-family rentals than for single-family rentals.  When one unit is vacant, you continue receiving rentals from the other units.  In fact, hiring a property manager may be justified by the cash flow, relieving demands on you as the owner.

• Financing for multi-family properties focuses more on the cash flow from the property, less on your income and credit.  You may find it easier to obtain financing on one 50-unit apartment building than on several single-family homes of equal total value.

• Improvement and maintenance costs, even taxes, are lower per unit due to the economies of scale of multi-family properties.  The purchase price may also be lower per square foot than a single-family home.

• Rentals of multi-family units have been a growing market in the U.S.  The foreclosure crisis of the last few years has put many former homeowners into rentals instead.   In some areas the demand for multi-family units has grown faster than the supply.

But you should keep in mind that the demands of multi-family properties are significant. Management needs, obviously, increase with the number of units.  Hiring a property manager may help with the daily phone calls – if the cash flow allows it.

In addition, insurance is more complex.  Thoroughly research insurance costs, as well as claims experience in the area that may affect your property.

Finally, multi-family properties have a smaller market of buyers when you are ready to sell, compared with single-family homes.  And it may take longer to sell once you are ready.

Doing your research homework is essential, of course… understanding the prospects of the local economy, surveying the preferences of local renters, as well as having a good estimate from a contractor of needed improvements.

Multi-family properties do have significant needs that require a solid plan, from maintenance to tenant management.  For investors familiar with real estate investing in rental homes, the economies of scale that lower the cost per unit in the purchase, financing and maintenance of multi-family properties are worth serious consideration.  Consistent cash flows, combined with eventual sale profits, may make multi-family property the right strategy for you.

Are you invested in multi-family properties?  What advice do you have for others considering jumping into the game?

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