The 5 Money Making Advantages of Multi Family Investing
Having rehabbed over 470 properties in the last seven years and collected over 600 apartment units I’m often asked, how can I become wealthier faster investing in real estate?
While most investors concentrate on some aspect of single family houses, I was always interested in multi-units (apartments) first, and then single family homes as a means of getting more multi-units .
From the very beginning of my investing in real estate, I liked the idea that a group of people (the tenants in a building) would get together and pool their money to pay down the mortgage on a property, and I liked the idea that they would also pool their money together to pay for all of the maintenance work for a building.
I especially liked the idea that they would give an owner so much money that the owner would have a bunch of money left over at the end of every month that could be used to either re-invest, save or to go out and have a good time with.
Essentially, I like the idea that other people were willing to help make me wealthy. I liked it even more when I started using management companies to manage my properties and no longer had to have contact with my tenants.
I soon came to realize that I could also wholesale, retail, pre-foreclosure, rehab, subject to and lease option apartment houses as well.
I also realized that there were certain advantages that investing in multi-units buildings had over single families.
1) The first was cash flow. Cash flow on a multi-family is always greater than that of a single family. Simply because you have more rents coming in.
The more units you have under one roof, the less risk you have. If you have a single family house and you lose your tenant, you’ve lost 100% of your income. In some instances, this could be your entire profit for the year. If you had a three family and lost a tenant, you still have two rent coming in to pay your expenses.
2) Economies of scale are in mulit-unit buildings. If you have six single family houses opposed to one six family, you have six roofs to be replaced or repaired, six lawns to be maintain, six tenants spread out through out your city or town.
In your six family you have one roof, one lawn and your tenants are centrally located. Economies of scale are in your favor.
3) There’s a lot less competition than there are in single family houses. Why? Because no one is out there teaching how to do it and all the single family guru’s make flipping single family houses sound as easy as chewing gum in the dark. The smart investors put multi-units in their portfolios along with single family houses.
4) Because of the bigger cash flows, you can afford to hire management companies to manage your tenants, thus eliminating that hassle while you go out and do what you do best (or should do best), find and finance them.
5) Your pay days are a lot bigger when you finally sell your property. This is because an apartment complex cost more than single family homes, because of this they obtain a greater dollar amount of appreciation. For example, a $100,000 single family house will in a market that appreciates 10% will be worth $110,000 while a three family house worth $300,000 in the same market (10% appreciation) will increase to $330,000. That’s $20,000 more money in your pocket!
You’ve know a few people who have made a lot of money flipping single family houses, but if you think of the all the people you know who have become extremely wealthy through real estate, you’ll realize that they did it through owning multi-units (apartments).
These are the five biggest advantages to investing in multi-units, there are many, many more. If you are interested in creating more wealth at a faster rate, adding multi-unit to your portfolio is the way to do it!
David Lindahi, describes it well.
What he is really saying is why knock yourself out on a single family transaction when for the same amount of time and hutspah you can work in multiples. He is correct, but why stop there? Is there no fun to be hand playing in commercials? Do you know that a small revolution is just now occuring? Seems that a m***** of people woke up and realized that most of our cities in the business districts go to sleep at night and sit there empty.
So guess what, they woke up. I was in happy little middle of the middle down town Burbank California. I have this dump;y little C-2 lot which is all of 30 feet wide and all they would let me build was store fronts. Well the other day I tried a three story development. Stores on the ground floor, offices on the second floor and way up on the top on the third floor residential living with a big roof guarden and sliding overhead gl***** and oh my god a vision from heaven. Damned instead of throwing me out they suggested that I submit and they would approve.
Of course thats when I told them it was an all metal and gl***** building. Still they said OK.
Sooo dear friends. David speaks a truth, but it is just another dimension and there are many others.
Never be satisfied with just one way of doing things. Always look at everything. Parking Lots, Commercials of many and varying kinds. Multiple Dwellings and how about a mixed use?? Thats where the forward thinking is focused.
A great time and thank you david. You have shown us another step on the path to real estate investing. So lets expose a few more?
Speaking of exposures you should see------
well perhaps another posting.
Cheers Lucius
I think the main reason people don't buy mulit-family units is because of the high costs of aquiring them. I'd love to have some apartments.
When you are in transaction it is as easy to bargain about a take back second or third for $300,000 as it is to do the same on a single dwelling for $30,000. I know it makes you gulp and choke on occasion, but get over it it is the same business except more zeros.
Go do it. Lucius
I would disagree on that point to an extent. I have a SFH that cost me 59K I have a duplex that cost me 60K the per unit cost is definately cheaper than SFH. Although you are correct that getting into them initially is usually higher
I have been a strictly a multi unit buyer and owner for 8yrs in CT. The prices of multis were typically less than a single family home.
I live in a 6,000 sf. converted to a single family house for less than $130,000.
In the beginning I shared my personal home with family tenants. As they moved on and my acquisitions grew I'd take over the unit. I now have an 18 room house that I love!!
I've bought 3 unit houses for less than $50,000 and they weren't rehabs. CT's housing economy was in a slump then but even single family homes were selling for quite a bit more. Thanks to David Lindahl, Robert Kyioski and author of "Millionaire Next Door and others you can no longer purchase a multi without marketing for motivated owners. Out of state investors have come and pushed prices to an a new stratosphere. A 3unit house on the same block and street as my other units sold at a foreclosure auction this weekend for more than $200,000. Imagine my feelings when my other units sold 6yrs ago for less than $50,000. Don't know if I should laugh or cry.
My 2cents