When considering purchasing an investment property the question between multi-family and single-family investments usually arises.
The majority of new investors jump to the thought of a single-family investment that they will rent out as this is much more straightforward, and often familiar to them.
Multifamily, however, is an entirely different story. Few people have experience buying an apartment building, let alone being in charge of one. Furthermore, multifamily properties are usually much more expensive and can be a complicated purchase.
Pro: Income Reliability
While it may be hard to achieve 0% vacancy at all times, you are very unlikely to have 100% in a multi-family home. So long as you have some renters in the property, you will have assistance covering your expenses, making them a more stable investment.
Pro: Forced Appreciation
Typically, the value of a multi-family building is directly proportional to the income it generates.
An apartment building can provide $1 million income annually, while a single-family home may only bring in $20,000 - $30,000.
As a multifamily investor, you have the opportunity to force appreciation of a property to increase the income of the asset through operational efficiencies, renovations and marketing strategies to increase the value of the property.
Pro: Economies of Scale
Investors will benefit from cost savings per unit when it comes to multifamily investing.
For example, there's a cost-savings per unit due to a larger size or quantity produced. When considering acquiring apartments, contracting out rehab projects, maintenance and cleaning companies will be less expensive due to the more considerable amount of units.
Con: Initial Investment
The downpayment and mortgage on a single-family property are much more achievable for most investors.
A multi-family investment can mean a multi-million dollar mortgage and a hefty downpayment.
On the plus side, there are ways to keep your initial costs down such as investing with a group of people or when done so through a real estate syndication.
While all investments carry the risk of loss, on average, a multi-family investment is safer than a single-family where all your eggs are in one basket. That said, both are excellent investments and real estate has historically been one of the best ways to build wealth for investors.
If you have any questions or concerns about investment properties, please do not hesitate to reach out. We have decades of experience in this area and would be more than happy to share our knowledge and be of value to you.
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