Multi-family properties, as the name suggests, are homes or housing complexes that have a number of different units available.
They house separate families, groups, or single people. There are a variety of different kinds of multi-family properties, such as apartment buildings, student housing, housing for the elderly or disabled, condos, or other rent sharing houses.
There are a number of reasons why real estate investors and home appliance companies may choose to invest in these types of properties, as well as a few reasons not to. Overall, the investment could end up being a solid financial decision which can provide you with extra income and security.
There are many ways to invest, and each of them, like all investments, comes with both a series of assets and a few liabilities. To learn more about multi-family properties and whether or not investing in them is a good plan for you, read on.
What Is the Difference Between Single-Family and Multi-Family Homes?
The first step to deciding whether or not to invest in a multifamily property is to understand the difference between multi-family and single-family homes. The primary difference is that in a multi-family property, one building contains a variety of units to house many families, groups, or individuals, while single-family homes hold just one family, group, or person.
What this means for investors is that there is both more variety in building type and less choice in certain other matters regarding your investment in multi-family homes. For those renting out the properties, for example, the need to fill all the rooms is key to making it a good investment, so being picky about renters is not as much of an option as it is with single-family properties.
Home Additions to Multi-Family Homes
For those making home changes and additions, such as those doing flooring, cabinetry, painting, or electrical work, investing in multi-family homes can mean that there is more job opportunity, as there is often more than one room to complete.
On the other hand, in institutional places such as student housing or nursing homes, things are often standardized, meaning you do a lot of the same work over again. Still, there is plenty of work to be done, so this can end up being a good choice in terms of job length and production.
Is Investing Financially Viable?
Now that the difference between the two property types is clear, you can move on to the next step in deciding whether or not to invest: is investing in this type of building financially worth it for you?
There are a few different ways to invest in multi-family homes. The most obvious one may be to buy the complex itself. Other ways include things such as buying a REIT or real estate crowdfunding.
Buying the Building
Apartment buildings, duplexes, condos, nursing homes, quads, triplexes, university dorm buildings, hotels, and similar structures can be bought. If you buy one of these buildings, then you would be the one receiving the rents from each of the units.
When considering this investing method, there are a couple of different options: you can either invest in smaller units, such as duplexes or quads, or in large-scale housing such as student housing. The smaller units, generally those with up to four units, fall under the residential housing title, while larger ones are considered commercial.
If you are looking to earn money, investing in even a smaller residential property can provide you with enough income to pay off a mortgage, for instance, and you can end up living a comfortable life. However, you will always have things like vacancies to consider, and will be in charge of maintenance, so stability can fluctuate quite a bit.
All in all, this is perhaps the most obvious choice when it comes to investing, which can provide a lot of benefits, but it can also be a risky choice due to all the factors outside of your control.
Buying a REIT
A REIT is a ‘real estate investment trust,’ meaning a corporation or company that owns a property. They collect rent from that property, which then pays its investors a percentage of that gain. Investing in this would mean trusting trained professionals from different companies to invest your money in real estate.
REITs generally buy specific types of real estate, such as complexes or office buildings. These are equity REITs. Others buy different aspects of real estate aside from physical buildings, such as mortgages; these are called REITs. A third type is called the Hybrid REIT, which does both.
These are fairly simple to purchase. Investors can go through a broker or even look at websites online to buy either one of these options.
REITs are generally a good investment because shareholders must be paid at least 90% of the taxable income. Many REITs even pay as much as 100%. However, there are a few drawbacks that make this something to consider carefully before deciding to invest.
Real Estate Crowdfunding
A third way to invest in multi-family housing is through real estate crowdfunding. This can occur if, for example, an investor would like to purchase a large building to remodel or revamp, but does not have the capital on hand to do so.
That investor might then turn to crowdfunding to make up the missing difference. If it is successful, those who chose to invest can get a percentage of the outcome.
This is likely the most risky type of multi-family real estate investment, as there is no guarantee of what the outcome may be or what you may gain from the investment. It is the least certain of the three methods.
Is It Worth Buying a Multi-Family Home?
Now that the three methods are clear, you can decide whether you want to invest and, if so, which method you will choose. Since there are a variety of ways to invest, doing so can be a good plan for a variety of people as well. There is an option out there for everyone.
There are a few other things to consider when making an investment decision, especially when trying to decide which method could be the best one for you. There are a variety of different factors that should be brought into consideration, each of which will help you to decide whether and how to invest.
The first factor to consider is how this investment could benefit you. There are a few ways in which this type of investment can help you, which are discussed here. Considering these will help you to make a solid decision.
Here is a list of the most common advantages and disadvantages to buying the property outright to help you make a decision on whether that option is the right one for you:
Pros of Buying a Multi-Family Home
There are a few reasons to consider buying a multi-family home, and doing so can end up being a great investment for you. It can also be a great way of bolstering your current income, as it can be an easy way to add a steady income stream to your finances.
Another great thing about these types of investments is that the cash flow is generally fairly strong, which makes it an interesting addition to your monetary repertoire. Here are a few of the advantages of buying one of these types of buildings:
- Getting a bank loan approved is often easier with multi than single-family homes
- A property manager can handle the management itself, which is often undesirable to investors
- More rooms and renters means a higher monthly flow of cash
- The cost of each unit is generally lower than with single-unit housing
- Big changes, such as new cabinets, increase the value of all units, not just one, which can raise the property value faster
Getting a loan for a multi-family property approved by the bank is often much easier than it may be to get one for a single-family property. The reason why is simple: returns expected are generally much higher, making it a better investment for the bank itself.
Often, real estate investors do not want to have to handle paperwork such as securing new tenants to fill vacancies, doing premise maintenance or revising security, and negotiating leases. With complexes and apartment buildings, where these things comprise a lot of work, a property manager can be hired to handle the paperwork. e
Renting out more rooms obviously means that, on average, you will have a higher cash flow than you would if renting out just a single house or apartment. Further, making changes and advances, such as putting in new flooring, security, or similar additions, means that the price of all units goes up together.
Similarly, the cost of making those large-scale changes in many different rooms or units at once is generally less overall than it would be if done in a single house. Contractors, builders, and other home job workers often provide discounted rates for big jobs. Since these types of alterations can raise the price per unit, the value of the building overall will increase as well.
Cons of Buying a Multi-Family Home
Just as there are many advantages, there are also a few negative aspects of buying and owning multi-family homes. Some of those things can include the following:
- It is more expensive upfront
- There can be high turnover rates
- You can not often be picky about tenants
- There can be a lot of maintenance involved
In most cases, buying an apartment complex or similarly large building is a lot more expensive than buying a single-person apartment or family home. Therefore, be prepared to budget appropriately for the initial purchase. On the plus side, banks are often more likely to approve loans for large purchases such as this.
Since there are often people moving in and out of places like student housing and nursing homes, the turnover rate for these rooms is generally quite high. This could mean that you are often looking for new tenants.
This high turnover rate has a second effect: you can not afford to be overly picky with who is allowed to rent out the rooms or houses. Unless you want to be constantly looking for new tenants, you will have to be more lenient and allow people to stay who might not be the first choice if you were renting out a single-familyhassle-free property.
Maintaining multiple different rooms will always be more work than looking after a single room. In an apartment complex, for instance, there are more bathrooms, kitchen, ceilings, and other things which often need a lot of care and maintenance.
Is Investing in REITs Worth It?
Like purchasing a multi-family home, investing in REITs has both advantages and disadvantages, which are explained below.
Generally, however, this is a lower risk method of investing in larger real estate than buying the building straight up.
Pros of Investing in REITs
Here are some pros of investing in REITs you should know about.
- It is an easy way to invest in multi-family real estate.
- It is the cheapest way to invest in this real estate
- It is a good way to diversify investment assets
- There is no management involved
- There is high liquidity
As previously stated, investing in REITs can be done through a broker or even right on the internet, making it an easy and hassle free investment method. Also, you can choose how much to invest, making it far cheaper than buying a building or complex straight out.
Further, those who already have strong investments in the stock market, for instance, can easily add some diversity to their investments by adding big real estate as well. This can help to balance gains and losses.
There is no management or property to look after, which makes this an easy and hassle free investment to make.
This kind of investment has high liquidity. This means that they can be bought and sold immediately, unlike the purchase or sale of a physical building, which can take months. You can even sell back to the REIT, though likely at a lower price than you bought the product for.
All of these factors make investing in REITs a simple, easy, and hassle-free way to invest in multi-family real estate, especially if you do not want to make a large-scale investment such as buying the property yourself.
Cons of Investing in REITs
There are a few reasons why investing in REITs can be a difficult way to make your investment in the multi-family housing business. Some of those include things such as the facts that:
- They can lose value quickly if interest rates fall
- Gains are taxed as income, rather than having different tax qualifications
- There is little control over how it goes
REITs can lose their value very quickly. Additionally, since they have to pay at least 90% of profit to their investors, there is often not a lot of leftover money to be used to invest in more properties. Therefore, growth of REITs is generally not very strong. This can change if you invest in private REITs, as it applies mainly to public ones.
Regular payments from REITs are taxed at the regular rates, which can result in high taxation especially when compared to other similar investment types.
Since REIT investors cannot choose which specific properties to invest in or do anything to aid the profit of those properties, such as advertising or adding to the units, they have very little control over the outcome. If an investment does not do well, the best option is simply to try to sell the share.
There are a few things to consider before making a decision, such as how much you are willing to invest, what the payoff is for you, and how committed you are.The easiest and cheapest option with the least overhanging responsibilities is to invest in REITs. This is easily done, and you can choose to invest as much or as little as you want.
Why Consider Investing in a Multi-Family Home?
Any time is a good time to invest in a multi-family home, and if you want to go all in, the best option is to buy the property outright. Buying a building with, say, twenty units will provide you rent from each of those twenty units each month, which will result in a strong flow of cash and a new source of income.
Another reason why this is a good investment to make in 2021 is that the housing market in the United States is not currently strong. This means that many people will be renting now, and so being able to offer a variety of different units and rooms for rent will provide you with a solid income.
Further, there are other types of people who are always in need of a place to rent. Consider, for instance, buying an apartment building next to a large college or university. Students will always need housing, and so chances are high that you will always have someone looking to rent your units.
The same is true of being near a hospital or similar area. Long-term patients and others such as the elderly often look for small apartments to rent, and this could be a good place to make a potential investment in a multi-unit house or building.
Economic Strength of the Investment
Another plus that accompanies investing in these types of buildings is that they often do well in spite of hard times or economic crises. The reason for this is simple: people always need housing.
Even in times of economic turmoil, and times when single-family housing rates plummet, rent recovery for multi-family houses is generally quick, and the decline in rent is not as steep as for single-family homes. This makes it a strong investment to make at any time.
Further, even in times of crisis, if you have a variety of different units available, it is unlikely that you will ever have a full vacancy. With a single-family unit, however, there is a strong possibility that in hard times your room could remain vacant for months on end.
For these reasons, investing in these multi-family buildings, and even purchasing them outright, is generally considered to be a solid financial decision during this time.
Making the Decision
Further, even acquiring an apartment, condo, duplex, or similar multi-family building is often easier and even proportionally cheaper than buying a single-family home.
For one thing, as previously discussed, it is often easier to get a bank loan on a multi-family home. The banks see it as an investment from which they will probably do well in the long run, and so are more likely to fund these requests.
Beyond that, you can use it to get rid of some of your own house expenses. Some people buy a house with multiple units, live in one of the units themselves, and then rent out the rest of the units to different people. Using this method, you can often cover your own utilities with the rent while at the same time making money from the excess.
Using this method, especially in a smaller residential house with two to four different living spaces, you could have a comfortable home for yourself and cover all of your mortgage and utilities with the generated rent.
Doing something like this will help you to get well versed in the world of real estate. If you plan to invest in real estate long-term, starting small with a duplex that you live in yourself, or something similar, will teach you the ins and outs quickly and through real life experiences. You will then be well equipped to move on to bigger investments later on in life.
Outfitting the Multi Family Home
If you choose to go all in and invest in purchasing a multi-family home, you will probably decide to do some revamping and give the units a glow-up. This will not only help it to look better, but can also increase the value of the units by quite a large margin, making the renovations financially beneficial for you.
There are a variety of things you can do in order to begin. For a start, make sure that the floors and ceilings are strong and well maintained. If they are not, then you can begin by replacing them. If they are outdated or out of fashion, putting in new, modern features can also be a good idea, as that will increase the appeal of the units.
Plumbing and electrics are also, of course, essential, and it is important to ensure that those are in good working order. Once those basics are covered, you can get into the more appealing parts.
This can include making the inside of the units look appealing and modern. Painting the rooms and walls, for instance, is one thing you can do. Another thing you can do is to change the wallpaper, if the rooms are wallpapered rather than painted.
Finally, it is time to get to the fun parts. Here, you can change the styles of the rooms themselves. Consider adding in new, modern sinks in the kitchen and bathrooms, sleek and shiny shower heads, contemporary toilets, and luxurious bathtubs.
In the kitchen, you can put in state-of-the-art fridges and freezers. The cabinets can be tastefully made of dark wood or other similar materials, and the countertops can be made from beautiful marble or quartz, depending on your style. Each of these home decor efforts can help to add to the appeal of the units, which will work in your favor by raising the prices of each one.
Who to Use as an Outfitter?
Once you have gotten past the buying step, you may be wondering who you can trust to help you outfit your units in a modern and tasteful way. If that is the case, you may want to consider using Superior Commercial Solutions as the company to help with this. A locally owned and operated company, they work hard to ensure that you get the right products for your needs.
Superior Commercial Solutions works on buildings all across the United States and provides a variety of services. One of the services they provide is the installation of new and intuitive designs for high-quality kitchen and bathroom decoration. This can span from new countertops and cabinets for the kitchen to brand new tubs in the bathroom.
Some of the installations that Superior Commercial Solutions can provide include:
- Decor
- Cabinetry
- Quartz countertops
- Surrounds
- Sink fixtures
Each of their products comes in a range of colors and styles, making them the ideal for all tastes, areas, and price ranges. Further, Superior Commercial Solutions is a high-volume provider, making them an excellent choice if you are looking to outfit many units.
Contact Superior Commercial Solutions
If you are interested in multi-family properties, then consider Super Commercial Solutions to install various products in your home. We will ensure that your products arrive on time and in one piece. Finally, we will aid with the installation process, assuring that each and every part is artfully and perfectly arranged in your units. With one company taking care of each and every step, there is no outside contractor, mover, or other third party you need to contact, making the process smooth and worry-free. To contact the company for more information, click here. We work on projects across the United States.