When Should You Branch Out Into Multi-Family Properties?

You achieved success with single family homes, developing your property management skills or working with a quality property management company who does business the way you like. You want to expand your business, but picking up another single family property doesn't sound appealing to you. Multi-family properties, such as apartment and condo buildings, offer their own set of advantages and challenges. Deciding when to branch out into multi-family properties is the hard part.

Confidence in Property Management
When you first start out in the landlord business, it seems like there's so much to learn and to experience. You get used to dealing with tenants, handling repairs, understanding the legalities behind renting single family homes, and adjusting to marketing your properties when you have vacancies. As you become more comfortable with everything property management entails, you are tempted to branch out more. You may have teamed up with a quality property management firm, or you have a good structure in place to handle all your needs on your own. As your confidence grows, you want to try your hand at a different type of rental - the multi-family property. You also have higher loan limits for these properties if you're taking out a mortgage, making it a tempting investment for your landlord investments.

Diversifying Rental Offerings
The rental market fluctuates due to many factors, from the health of the economy to the movement of your local housing market. If you only have single family properties, you may run into a situation where you have units sitting empty on the market because interest has shifted away from these property types. If you have a diverse rental property portfolio, shifts in one area won't necessarily affect shifts in another. If you're worried that your single family rentals are about to become less profitable, it's a good time to look into multi-family properties.

Moving into Downtown Areas
It's hard to find single family homes in many downtown areas, especially if you want to be in the middle of developing neighborhoods. If you have your eye on that new developing tech center, it may be easier to pick up a multi-family apartment building or duplex than hope for a single family home remotely near the area. You don't want to pass up the opportunity to get in on the ground floor in an up and coming area, especially as real estate prices are likely to increase once it becomes more established. Strongly consider getting into multi-family properties in this situation.

Easier Maintenance
Tired of driving back and forth across town to handle maintenance and other tenant issues with your single family property homes? You only need to go to one property for handling all the maintenance issues with a multi-family property. If the entire building is handled by a large furnace and other systems, you may be able to address multiple tenant issues with only one maintenance visit. That's time saving efficiency that gives you more time to enjoy your life.

More Cash Flow Buffer
If a tenant suddenly moves out of your single family property and you don't immediately have a replacement, you aren't getting any income out of that property during that time period. If you have a multi-family property, one tenant moving out in the middle of their lease term isn't a major cause for concern. You still receive income from the property from other tenants, so your cash flow is buffered against major changes.

Posted on Jan 05, 2015


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