Investing In Multi Family And Apartments
Multi family and apartments have always been attractive real estate investments.
One way that you can tell this is that multi family and apartments have always had very low CAP rates, relative to office and retail real estate investments, for example.
Multi family and apartments are also a ‘step up’ for the beginning residential investor who might start with one or two single family homes, is successful with those, and is ready to move up to a larger residential income producing investment.
Why Invest In Multi Family And Apartments
As the saying goes . . .
People always need a place to live
. . . and that’s what makes investing in any residential income investment financially attractive.
Other reasons to invest in multi family and apartments include:
Ease of Management
The individual units of multi family and apartment properties are not geographically spread out as are single family homes.
Also, if the number of multi family or apartment units you have is large enough you may be able to justify the expense of an on site manager.
Economies of Scale
If you’re replacing the roof on a house, you’ve replaced it for just that one house. When you’re doing a roof repair on multi family or apartments you’re taking care of multiple units.
Easier to Sell
You’ve got multiple selling exit strategies when investing in multi family and apartments.
You can sell to a beginning single family home investor ready to move up.
You can sell to another investor who already owns multi family and apartments.
Or you can ‘go condo’ and sell the individual units to owner-occupants or beginning single family investors.
The Risk Of Investing In Multi Family And Apartments
This graph caught my eye the other day.
Shadow housing inventory is property that COULD come on the market for sale and eventual rental. The reason this product is not on the market is that the banks are sitting on it, for now.
So far the banks have been able to manage the gradual flow of short sale and foreclosure property coming to market.
When this REO-type of property comes to the market, for the most part it’s real estate investors that snapping the product up, rehabbing of needed, and turning the investment into residential rental property.
As an investor in multi family or apartments you’ve got to consider the very real risk that at some point the lenders will increase the flow of foreclosures – or maybe lost control of the flow altogether.
At which point there will be a lot of single family home property that was formerly owner-occupied now coming onto the market as rental property.
Many smart real estate investors don’t think this will happen.
But then, very few real estate investors envisioned the crash of the real estate market that we’re now muddling through.
Think Outside The Box
When analyzing what type of investment real estate is right for you it’s important to think outside of the box and consider the competitive threats to your real estate investment from as many angles as possible.
In The Basic Property Management eBook there’s a lot of time spent on teaching you the proven, real world techniques that the professionals use to minimize the risk and maximize the return of your real estate investment.
More About Multi Family And Apartments
As always, I hope you've found this investment property management training article on multi family and apartment investing useful!
Jeffrey Roark
Basic Property Management Blog
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