Five reasons why you should be investing in multi-family properties.
I have helped many investors find under valued, and often under-the-radar, properties with strong income potential. In a hot market like Nashville, multi-family properties have become a dependable and lucrative investment for investors both large and small. Multi-family properties are very attractive to investors for a number of reasons.
- 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.
- Economies of scale. Economies of scale are in multi-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.
- Less competition. 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.
- Fewer headaches. 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.
- Bigger pay day. 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!
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!