Investing in multi-family housing helps spread out your risk, without dramatically increasing your costs. The lower impact of losing a tenant, and the ability to pool resources for repairs and maintenance, are benefits of this approach. See the following article from Creative Real Estate Online to learn more on this.
If you are serious about making money through the inevitable “thick and thin” of real estate investing, then you need to think about multiple income streams and a wider distribution of the potential risk factors which go with every investment.
The secrets of successful real estate investing were not taught to me by a guru and did not come to me in a moment of enlightenment. Instead I gleamed each one through trial and error and hard-earned experience gained through actually making mistakes and learning from them.
That’s right! In the path I took I had some luck along the way, but most of the time, I made mistakes, learned from them, and applied what I learned to the way I invest. In order to do that, I left nothing to chance.
The reason I put in so much hard work is because, I knew I was working towards very specific targets and very specific ideas, and I was learning the shortcuts, and what I should be looking out for each time I closed a deal.
What I realized is that if you handle them properly, are careful how you invest, and know how to set up a remote management network, so that you do not have to deal with a single tenant–EVER, multi-family properties can be a fast-track on the road to financial success.
Maximize opportunities and minimize risk
The reason for this lies in what I like to call the income development curve. With any single-family dwelling that curve depends upon a number of variables that rely on the single family living there. The moment you consider multiple-family dwellings, you begin to spread the risk of stagnating.
I will give you an example: Suppose you are renting out a single-family dwelling and the family moves or are suddenly unable to pay the rent? A couple of months’ inaction plus the cost of finding a new tenant are enough to wipe out your profit margin.
This is a nightmare initiated by what I call a “linear chain of action” where you and the tenant are engaged in what might look like a tug of war between you and the tenant.
Experience has taught me that when you are dealing with multi-family dwellings, you no longer have to engage in this linear action. You have multiple interests, which represent the group of tenants, pooling their resources together to meet repairs and maintenance.
Add to this that when one tenant leaves, the others are still paying their rent while you find a new one, and you will realize that in terms of making money, multi-family dwellings maximize the opportunities and minimize the risks.
Create a built-in buffer
The truth is that investing in multi-family properties spreads out the risk of your investment without drastically increasing the costs and, in addition, allows you to create a built-in buffer against an apartment or two becoming vacant at some point (which you always need to be prepared for).
With a single-family property should the tenant’s personal circumstances change, you may well find yourself missing out on a couple of months of income, which is enough to wipe out your profit from that property for the year.
The risk of this is lessened with a multi-family property. A tenant or two moving out does not affect your monthly income from the building enough to seriously jeopardize your annual profit, and that is one of the beauties of investing in multi-family properties.
Less competition for good properties
Couple the reduce risk with the fact that (thanks to popular misconceptions), you are competing with fewer real estate investors for the most choice properties than in the single-family home market.
This is not to say that you should develop a mindset which specifically looks at multi-family properties to the exclusion of everything else. Far from it. Good business is where you find it.
I started out in real estate investing with a single-family home. If you come across a good deal or need to flip a property quickly, so you can invest in an apartment block, never overlook the possibilities offered by the single-family property.
This article is reprinted here with permission from Creative Real Estate Online at http://www.creonline.com.