If you’re considering property investment then you know there are several approaches to investment which can vary from house flipping through renovation, or buying to let. But what are multi-family investment properties and how do they fit into a property portfolio?
Multi-Family Investment Properties
A multi-family property is a property that houses multiple households such as a purpose built block of apartments or a larger property that has been converted in condos. Your investment into such a property could be on your own or with a group of investors.
The advantage of multi-family property investment is that profit margins are typically higher on properties that share a building because there is less external work per property, and you save on renovation and decoration costs through economies of scale such as buying large quantities of flooring, multiple bathrooms and kitchens, so you can negotiate with suppliers for lower rates on products and installation.
A further advantage of multi-family properties if you are a buy to let investor is that your property and management costs are split across multiple properties so they are lower per property and more predictable and also your income is more secure as it is split across multiple tenants rather than reliant on one tenant who might leave and put a hole in your income for a few months.
Should you invest with a group in a multi-family property then there will be very little involvement in the management of the property for yourself, it is a straight financial arrangement not consuming much of your time, just a return on investment consideration. However, margins are lower with a group investment as inevitably whoever is managing the property is taking a cut of the margin, and there are more legal and administrative costs involved.
Property Investment as a Career
Multi-family investments can be a great way to turn property investment into a full time career because once your first multi-family property is live you should have enough regular income to quit your full time job. This will then allow you to either consider further multi-family investments or to get your hands dirty flipping a few houses to build a war chest for further property investment.
Property investment can be a rewarding career choice as the investment decisions you make are real time, allowing you to cash in properties when you want to free up funds, or to invest in longer term strategies by purchasing single home and multi-family properties for letting.
One of the keys to successful property investment is to know the area in which you are investing. While it may be tempting to invest in a growing location in a city in your state or further afield, it is always advantageous to invest in your own town or city because you know the area, you know what is happening in districts which might affect property prices such as development of new housing estates, infrastructure changes, crime rates, locations of school catchment areas. Invest closer to home to give yourself an advantage.