Multi-Family Housing: Understanding a Lucrative But Challenging Type of Property Investing

It is fair to say that investing in multi-family properties does not come without some risks attached, but there are also plenty of potential rewards available when you …

Apartment building

It is fair to say that investing in multi-family properties does not come without some risks attached, but there are also plenty of potential rewards available when you get it right.

If you are a property investor looking to build a worldwide portfolio, a site like offers a window into the opportunities available. When it comes to multi-family property investing, here is a look at some of the aspects concerning this type of housing that you may need to consider.

In Search Of Cash Flow And A Decent ROI

One of the fundamental reasons why some seasoned property investors are more than willing to entertain a multi-family housing investment proposition, is simply down to the math that drives the deal.

If you look at an opportunity where the numbers work for you as you primary objective and then view what type of property it is as a secondary consideration, it is quite likely that various multi-family investment propositions will hit your inbox.

For some investors, single dwellings, duplexes, condos, they all come alike and are all up for consideration, provided they offer good cash flow and a decent ROI.

Although it is the cash flow that really matters for some investors, that is not to say that you shouldn’t act with due diligence and do your homework every time, so that you know exactly what you are getting into.

Ticking All The Right Boxes

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It doesn’t actually take that long to analyze the investment potential of a property, especially if you have a list of fundamentals that you want to be able to tick off each time as a starting point for looking into the idea more closely.

Location is continually talked about when the subject of property investment is mentioned, but there is a good reason for that, it really matters.

Although it might depend slightly on what you want to do with the property, the location is often critical to the success of your investment and will dictate what you pay and whether it works in terms of rental returns.

If you are looking to attract renters and generate a decent yield, you obviously want the property to be in a popular location and with good road and public transport networks. When it comes to investing in a multi-family property, the same rules apply, you simply need to first calculate all of the potential rental each unit can generate and see whether it all adds up to a number that works.

The Positives

If you are trying to weigh up why you might invest in a multi-family property over a single family dwelling, there are a few positives that might sway your decision in favor of this particular type of investment.

With a multi-family property, you have what some in the industry refer to as multiple doors to rent. What this means is that when you have a number of units within one property, the distinct advantage is that this scenario lessens the impact of having no income coming in.

If you have a property that is standing empty it is not earning you any money and costing you money, at least when you are waiting for some other tenants to come in, the rental income is unlikely to dry up completely.

It is also worth considering what you could class as the convenience factor. If you have a few multi-family property investments, you only have a few locations to visit and look after, rather than having to spread yourself around numerous locations.

The Negatives

There are some aspects of buying a multi-family property that are more challenging than buying a single dwelling, but whether you view them as negatives is a matter of perspective.

If a multi-family building is larger than four units, you should be prepared for different financing requirements and your upfront costs are likely to be higher under these circumstances.

The income you are able to generate from the property is a major consideration that lenders will want the right answers on, so you will need to be able to demonstrate that the building can bring in enough money each month to service the loan with something to spare.

You will also likely find that the lender will request personal guarantees and you may well also be asked to prove that you have the resources and suitable level of financial reserves to satisfy some fairly strict lending criteria.

As long as you are prepared for what lies ahead, investing in a multi-family property can proved to be a viable addition to your property portfolio.

Author Bio

ANGELO CINEL Chairman and MD WIRE Consulting WIRE Consultings Chairman and MD. Angelo Cinel founded the first Italian company to offer international real estate consulting back in 2006; that company has since become WIRE Consulting. He has over 15 years of experience in the property sector and 10 in international real estate. He has also been head of Professionecasa Prestige International, the foreign branch of Tree Real Estate, a group that includes three leading names in Italian real estate. Angelo Cinel personally assists corporate clients to diversify their international property assets.

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