Multifamily Investing Pros and Cons
What is multifamily real estate investing? It is the investment strategy that focuses on purchasing multifamily dwellings and renting out the units. Apartment buildings, two-flats, three-flats, and other types of shared dwellings fit into this category. This is in comparison to people that invest in multiple single family dwellings.
More specifically, what it is it like to manage multifamily dwellings in Chicago. Chicago is filled with apartment complexes, tenements, project housing, low income housing as well as expensive condos and duplexes. You have tenants willing to pay very high rent as well as people that are on a fixed income or have subsidized housing.
Is multifamily investing worth it? Read below to see the Pro’s and Con’s of multifamily investing.
Multifamily Pros
Ease of work. Less physical locations to be present at for business. You have less maintenance since everything is in one location. Your tenants are all in one place so you save some leg work since property management will be easier with fewer physical locations. This will result in having to hire fewer staff to delegate duties to. With more clients the likelihood of being paid increases theoretically as well. If you have a vacancy in a unit, you are not at a 100% vacancy like a single family home would be.
Multifamily Cons
You will likely incur more damage from tenants in apartments. You will have a higher turnover in apartments since they are usually a shorter term tenant compared to single family home tenant. You will have more rents to track and you will have to make sure that they are all paid on time. If your units are in higher end neighborhood these risks should be decreased but the downside to the higher end areas is that the cash flow is reduced drastically and many times positive cash flow cannot be achieved. You have more tenants to make complaints and one bad or loud tenant affects everyone else in the building. When you want to sell the multiunit building, there are less buyers out there to purchase the property.
In Conclusion
There are many pros and cons to multifamily investing but it ultimately depends on your investment strategy, expertise, and comfort level. If you are looking for 5-12% returns on a property why not become a private lender? Private lending secured by real estate is a great way to get safe and high returns without having to put up with day-to-day operations and 3am phone calls. If you are set on becoming a multifamily investor, we suggest starting with a single family home since it will only involve one tenant. Once you have some experience with that, work your way up to a 2-flat or 3-flat. From there you can continue to invest in larger buildings. Your tenants will make or break your investment. The best advice we can give is to interview your potential tenants at the property they currently live in. The way they treat the property they live in now is a pretty good sign of how they will treat your property when they move in.