Multi-family vrs Single Family properties

If you are new to commercial real estate as an investment vehicle, then perhaps you should consider multifamily rather than single family residential.

People look for single family properties they can rent because they have the expertise from a lifeime of buying single familiy properties for themselves. The entry to the investment is cheaper, and does not require a lot of knowledge or number crunching. The question is, "Will it produce rent, and will I net enough to cover the mortgage and make a profit?" If it has never been rented before, then it's unlikely that you will know the answers, unless there are other owners of similar properties who are doing the same thing. But even so, the numbers and vacancy rates you hear about, may not be the real story.

Multi-family property investments are simple, especially if you use a broker who can crunch the numbers and explain them to you. They require a similar set of knowledge and skills as single family and there are so many different types, to choose from, one will certainly fit your investment style and comfort level.

Apartment buildings are one place to start. Remember for either investment of single or multi-family you will need the ability and willingness to hold for multiple years. Single-family properties require more management and maintenance, because each single family property issue is infront of the individual tenant. When a tenant moves out, you will have no income until a new tenant moves in. Maintenance is necessary for each property you own. Multi-family properties are easier in comparison to manage and maintain because of the consolidated maintenance and the rent security of multiple tenants for each property.

The property knowledge required for Multi-family is similar to single family, as it is still living quarters, but it will have common areas and amenities that can be shared by all tenants.  With a Multi-family building,  with a good rental history, then it is likely to continue based on that history. If something changes in the market, it's generally a percentage change over a period, and rarely 100%.

With multi-family properties, you will pay more to get started, but the idea is to find a property that will pay your debt service and then let the tenants pay your expenses. If you buy a solid property, well constructed, in a good location, then chances are good it will stay rented and not show wear and tear before you start making a profit. There are many sizes and types to fit practically any budget. Concrete, block or brick construction will last longer in most parts of the country over wood. The best properties can sometimes be the ones with a motivated seller. The worst will be the ones where the seller knows something that will effect the future revenue stream, that you do not know. We solve this with some due-diligence. Part of your due diligence will require you or your broker to drive the area to see if there is anything new which might effect your prospect property.

Consider multi-family properties over single family residential to reduce your vacancy risk, provide a greater return and bigger future upside.