Multifamily properties come in many shapes and forms – duplexes, townhouses, semi-detached houses, and apartment buildings, to name a few. Billionaires and millionaires have seen their wealth grow by developing residential and commercial multifamily properties.
Although these types of properties can multiply your income with little additional cost, they are more complex investments that demand special attention. Following are some important factors to consider when contemplating a multifamily property investment:
Building from Scratch or Buying Pre-Built?
As a real estate investor, you are responsible for the building’s structural integrity and safety. If you are looking to buy an existing multifamily property, it is important to thoroughly evaluate the building for any major issues. If you go down this route, make sure to enlist the help of an inspector or engineer to check everything from its foundation and roofing to plumbing and electrical as well as any previous repairs done on the property. The upside about pre-built multifamily properties is the possibility to begin making profits quicker.
Alternatively, some investors choose to build from scratch and avoid dealing with things such as dated layouts, aging infrastructure, and other potential concerns. In addition, when constructing a new multifamily property, investors are able to cherry-pick the location of the development. New constructions in attractive, gentrifying neighborhoods can earn investors top dollar as growing demand sends prices up.
Reduced Risk and Easier to Finance
Contrary to common sense, million-dollar multifamily properties are oftentimes more likely to be approved by a lender than the average single-family rental home, as the former typically generate solid cash flow on a monthly basis from numerous tenants. This helps balance out the risks involved with potential vacancies and equates to a more desirable investment in the eyes of lending institutions.
Multifamily housing may include triplexes, townhouses, high-rise apartments, and more. Additionally, these developments tend to have a range of size units and even serve specific demographics such as low-income, age-restricted, and student housing. These myriad options make multifamily units an alluring investment type that enables investors to specialize in niche markets.
Be sure to carefully consider the type of occupant and the relationship you are willing to have with your target audience. Remember that is it also important to analyze your competition. With multifamily unit rentals, the competition can be fierce and entry barriers high, so you should be prepared and do your due diligence as you hit the ground running.
Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.