4 Reasons You Should Opt To Invest In Multi-Family Units Over Single-Family Homes
When people decide to invest in commercial property, one of the first questions that they tend to ask themselves is whether they should invest in single-family homes or multi-family properties. When it comes down to it, this is a personal preference. However, there do tend to be some benefits to investing in multi-family properties over single-family homes.
Benefit #1: Better Economy of Scale
When you purchase multi-family properties instead of single-family homes, your per-unit expenses will be significantly less due to the fact that the units are in a single location. For example, there will be fewer roofs to maintain, a single garbage bill to pay, one primary lawn to mow, etc. It will be easier to collect rent, evict tenants, etc. since your tenants will be literally within walking distance of one another, which makes the economy of scale far easier for you to manage your overall investment.
Benefit #2: Less Hassle to Purchase
While it may seem obvious, you may not put it together right at first or truly consider how much time and money it takes to purchase 20 single-family homes vs. one 20-unit complex. It is a lot easier to visit a single property, negotiate with a single owner, come to terms with that owner, and perform a single closing as opposed to visiting multiple properties, going through numerous closings, etc. This right here is going to not only save you time and money, but it is going to allow you to focus on growing your investing business.
Benefit #3: Risk Is Spread Over More Units
With single-family homes that are vacant for months at a time, you are left paying the mortgage. However, if you have a multi-family property, such as a 12-plex, and a couple of the tenants are evicted or vacate on their own, you still have plenty of rent coming in each month to cover all of the monthly expenses that need to be paid. Multi-family properties provide investors the ability to limit their risk with multiple tenants.
Benefit #4: Less Competition
Believe it or not, most investors have not yet realized the benefits of multi-family properties. Instead, they are stuck on buying, fixing, and flipping houses, which has to do with single-family homes. One reason that people don't enter the multi-family property arena is that they think it is difficult to secure funding; however, you won't know if you have the right financial makeup for it unless you talk to a lender. If you are working with a commercial real estate brokering agency, they can help you find a lender.
If the benefits of multi-family properties interest you, don't hesitate to reach out to a broker to find out more about what it takes to get commercial real estate financing and to assist you in finding the right property for you.