Reasons to invest in multi-family homes:
- You expand your real estate investment portfolio faster. Multi-family homes are the best type of income properties for building wealth and generating higher returns.
- You will experience easier property and time management by having your investments under the same roof.
- You can make great profit by purchasing a multi-family home that is in disrepair and renovating it. That is because any new upgrade or renovation to the property will result in higher values for each rental unit you own. This can be in the form of rental price or selling price.
- You will generate more cash flow each month along with slow, yet steady appreciation in the value of your real estate investment portfolio.
- Your mortgage approval application and process can be easier as there is less risk involved for the lender. Multi-family properties generate a solid cash flow and with even at 10% vacancy rate, the likelihood of a power of sale on an apartment building is not as high as a single-family rental.
- You can manage your own investment property. It would be much easier for you to manage multiple units in one building versus in different locations.
- You will have the luxury of hiring a professional property management company, as it will cost you less with a multi family home.
- You will save the pain of getting multiple insurance policies for multiple properties, instead you will get one insurance policy for multiple units at the same location.
- You will have less competition. Seize the opportunity, as there are usually fewer people investing in multi-family homes due to many personal considerations.
Things to consider when purchasing a potential multi-family home:
- Property location: Pay attention to properties located in solid neighbourhoods, places where people want to live.
- Condition: Take into account how much time, money and work the property will need in order to be rent-ready.
- Rent roll: Look at the current rents and compare them to the average rents in the area to see what the property should rent for and can help influence your buying decision
- Revenue & expenses: Look at what rental revenues are coming in and what the current expenses are and see if it makes sense, remember to add in your approximate carrying costs to see if you will be cash-flow positive.
- Vacancy rate: Look for a vacancy rate below 10% and see how long each unit is vacant per year so you can figure that into your carrying costs.
- Zoning: You want to ensure that the property is zoned for what it’s set up as it is very common to see a triplex that is only legally zoned as a duplex.
- School ratings: Poor overall public and private school ratings can deter tenants.
- Public parking: Tenants need to have places for themselves and their guests to park.
- Amenities/attractions: Parks, restaurants and shopping should be nearby
- Walk score: The area should be walkable.
- Nearby businesses: The business district should be thriving and businesses should be open.
- Overall condition of area: Street lamps should work, trash should be picked up and sidewalks and homes should be well-maintained.
- Public transportation: Tenants want easy access to and from work, school and other necessities.
- Condition of other properties: Run-down buildings deter prospective tenants from living in the neighbourhood
We can help you plan a long-term real estate investment strategy based on your current income, savings, availability and property management skills.
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