Are you searching for more information on the pros and cons of investing in multifamily in 2021? If so, you’ve come to the right place.
Multifamily properties are one of the best investments that any investor can have because they enable an investor to build wealth while establishing consistent passive income.
If you’re ready to ‘pull the trigger’ and invest in your first multifamily property, you may be wondering what are the pros and cons of investing in multifamily?
This is an understandable question to ask because multifamily is a big commitment but it also comes with big rewards, this is why in this article I’m going to share with you the pros and cons that come with investing in multifamily properties.
The Pros Of Investing In Multifamily
Demand – Multifamily properties are more in demand than ever before (especially in 2021), as more people want to enjoy the convenience and flexibility that comes with living in a multifamily property.
Passive Income – Let’s face it, the passive income that can be enjoyed by investing in multifamily properties is obviously one of the biggest benefits, especially when it’s a bigger building because more doors equals more income.
Lowered Risk – Investors who choose to put their money into multifamily properties will enjoy a lowered risk, compared to those investors who put their money into single family properties. Why? Since a multifamily property has more units, when tenants move out, the other units will always be occupied and brining in income.
Diversity Of Product Types – Multifamily properties are never boring since there’s always a variety of product types to choose from including apartment buildings of all sizes, duplexes, triplexes and condos.
Fewer Loans – When an investor puts their money into single family, they typically have to have multiple loans to invest in multiple single-family homes. Contrast this to the multifamily, where an investor typically only needs one loan to invest in a multifamily property.
Availability – Multifamily properties are available everywhere nationwide, especially in smaller towns and rural areas where it’s possible to find affordably priced properties.
The Cons Of Investing In Multifamily
Now that I’ve provided you with the obvious benefits that come with investing in multifamily properties, here are several ‘cons or downsides that can come from investing in this asset class.
Something you’ll clearly see when searching for multifamily rentals for sale is the higher price point. This makes sense though, especially when you take into account the multiple rental units these buildings hold. Multifamily properties are generally bigger than single family homes so they come at a larger cost. However, when done right, that cost is balanced out with the multiple income streams.
Experience Is Usually Needed
Investing in multifamily properties can be difficult if you’re a beginner going up against the tougher competition. The advantages of multifamily properties draw in savvy highly-experienced property investors (especially when it’s commercial real estate). If you don’t know how to find a good deal and negotiate better terms than them, it can be difficult to find strong investments.
Because you’re dealing with a bigger investment property and more tenants, multifamily property management could prove to be more responsibility than you bargained for. When you look at the duties of being a landlord (rent collection, tenant screening, maintenance, etc.), it becomes more complex. Of course, you can always hire professional management to rid you of that burden, but you’ll need to justify the extra expense so it doesn’t cut into profits.
Investing in multifamily properties is also more complicated from a legal perspective; multifamily properties usually come with more regulations surrounding them. You should do your research before investing in multifamily properties in a certain market. Read up on the laws in that state, or else you could risk facing fines.
Ultimately, the choice to invest in a multifamily property is up to you, so you must take the pros and cons into serious consideration before you move forward with your investment.
If you’re still on the fence about investing in your first multifamily property, you may want to start small by investing in a duplex or triplex before you move onto investing in a larger property.
Tips For Finding Your First Multifamily Property
Once you’re ready to start searching in earnest for your first property, there are several tips that you should follow that will help you with finding the right property.
Most people interested in multifamily property would head to a listings platform to search for properties “for sale,” and to compare the pricing of multifamily properties they are looking for in their area.
There are plenty of real estate listing platforms out there, but not all of them list every multifamily property available.
Deciding which platforms to search on can end up taking a lot of time, and can be fairly expensive depending on the type of deal you’re trying to land.
Off-Market Multifamily Properties
While you may be used to searching for new properties on a listing’s platform, there are major benefits to sourcing a property off-market.
If off-market deal-making sounds complicated and time-consuming, there are now tools like Reonomy that can help you find multifamily properties to invest in, despite those properties not being actively listed for sale.
You no longer have to spend valuable time taking trips to your local county recorder, clerk, or assessor’s office to perform a property search and find out what return an owner would expect on an asset.
Benefits of Off-Market Deal-Making
Benefit #1: Little-to-no competition.
One benefit of off-market deal-making is that, since the property isn’t actively being listed, you’ll likely be the first person to reach out to the property owner to propose a deal.
At the most, you’ll be one of a very select few.
If the owner has not listed the property, they are likely not actively looking to sell. However, this does not mean that the owner wouldn’t be open to the idea of a sale.
There are certain trigger signs that you can look for in a property owner to know whether or not they are worth approaching.
Benefit #2: No broker fees.
Another benefit to searching for off-market multifamily properties is skipping broker fees.
This kind of direct purchasing can allow you to offer more money directly to the owner of the property or to skip fees that are usually incurred when listing a property.
Benefit #3: Flexibility.
When looking for off-market properties, you also have much more flexibility.
Since you’re dealing with owners directly, rather than intermediaries, you have the opportunity to create more flexible deals that benefit both parties.
Contact Blackbird Realty
At Blackbird Realty, we specialize in property management for multifamily and single-family properties. To learn more about the property management services we can offer you, contact us today by calling (702) 903-3556 or click here.