Mulit-family is a great next step for experienced investors

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Should You Invest in a Multi-Family Real Estate Property?

When it comes to investing in multi-family real estate, many people are hesitant to take that first step. There are many factors that can make anybody looking to invest in multi-family properties a little skeptical.  Cost, maintenance, and financing are just some of the details that can make investing in this kind of real estate nerve-wrecking.  However, the benefits to investing in these types of properties can often outweigh the costs. One of the best ways to figure out if this is an investment you want to make is to determine if the good can outweigh the bad, and whether or not you can handle the stress.  Outlined below are some key points to consider before you brush the idea of investing in multi-family real estate aside.

Cash Flow

The main reason many people choose to invest in multi-family real estate is because of the potential payoff. Renting out several properties at once has the potential to bring in a steady cash flow at a higher profit margin. While the original cost for a multi-family property is more than a single-family property, over time the multi-family property will generate more money.  However, because it’s a larger investment at first, it’s important to make sure financially that you can handle the large investment because the payoff may take some time.

Management

Managing multi-family properties is another area that makes people nervous about investing.  However, if you purchase a property that has multiple units under one roof, it will be way easier to manage compared to several single-family homes spread out across many neighborhoods.  The downside to managing multi-family properties is that there could be several issues happening simultaneously.  Depending on the property, it might be wise to invest in a management service.  These and potentially other kinds of services are expenses that you should consider and put into your budget.

Management also means upkeep and making sure you have good tenants.  You face the same risk with single-family properties as well, but if you have several bad tenants that could potentially mean damaging effects to your property.  It’s important to make sure that you have a strong lease in effect that protects both you and your properties from potential threats.

Tax Breaks

Hearing the words “tax breaks” can make anyone smile, so hearing that multi-family properties get tax breaks should put a huge grin on your face.  The government likes when someone provides clean, safe, and affordable housing for residents within a city.  Because of this, you can gain a variety of tax incentives or tax breaks.

With every potential negative effect, there is on a multi-family property, there is also a potentially equal perk.  The best way to truly determine if investing in multi-family real estate property is right for you is to look at your own personal situation.  While multi-family properties are not necessarily a gamble, there can be several factors in the beginning that make it difficult to effectively run and rent out your properties.  You should always review your situation objectively and ask yourself if owning a multi-family unit is something you have the time, energy, money, and resources to take on. Settling into the role of real estate investor doesn’t happen overnight. If you are serious about investing of just want to know more always talk to a real estate professional before you make any investment moves.

3 COMMENTS

  1. I’m trying to decide whether to invest in multi-family real estate and really appreciate the information you have here. The tax breaks and the potential to provide a steady cash flow is enticing. I’m not sure about managing the property and plan to look into hiring a management service. Thanks for the helpful post!

  2. My next purchase will definitely be at least four units, maybe more. I think the advantages definitely outweigh the negatives.

  3. Interesting read! I’m one person that never likes the idea of investing in a multi family property, but you’ve been able change my mindset about it. However I’d give a second thought to it before considering to invest on it. Your article is quite educative and informative. Many thanks!

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