A Positive Cash Flow Or A Negative Cash Flow Investing In Multi Family Properties

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Investing In Multi Family Properties

There are many ways to start investing in real estate. For a beginner, a good strategy may be to buy a multi-family unit to rent out. Ideal for viewing sizes of four families or less per building. This will allow you to still own the building with a residential mortgage while taking advantage of lower interest rates. Here are some great reasons why investing in a multi-family building can be less risky than other types of housing.

First is the competition. More investors are going to come after those single-family homes. This can drive up the value of those homes to the point where they no longer generate cash flow for you. Don’t rely on appreciation to generate cash flow. You need your property to be cash flow positive right out of the gate. If you are planning to be a homeowner, you can purchase a unit that has more than one rental option.

Then there is the fact that you have more than one unit to rent. If you buy a single family home and the tenant skips town, you’ll have to cover the entire mortgage payment until you can rent it again. With a multifamily, it’s unlikely that all of your units will be vacant at the same time, giving you a bit of a cushion. If you own a four unit building, one tenant leaving cannot make your cash flow negative! This can make all the difference in the world to your annual profits.

Multi family units bring you more money per month. Depending on your market, duplex or triplex properties may be similar to single-family homes. However, you can get more rent for 2 units than for one unit. So, you’ll get more money each month for roughly the same mortgage payment. This means more positive cash flow – the most important aspect of real estate investing!

Average repair cost per unit is low. If you have 3 single family homes and each needs a roof replacement, that’s a lot of money per unit. However, if you have a triplex that needs a new roof, you are effectively replacing 3 roofs, reducing the cost per unit. Same goes for maintenance, less travel time to move from unit to unit, increasing labor costs.

As you grow your real estate portfolio, a property management company will be able to afford the increased cash flow that your multi-family units provide to you if you so desire. This will free up your time to find other deals or do whatever you want!

So, don’t fall into the mindset that real estate only consists of single family homes. Smart investors will have a portfolio that includes a mix of single and multi-family properties. Just work the numbers and you’ll find many family investments worth your while!

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