Pros and Cons of a Multifamily Real Estate Investment

Multifamily real estate is what it sounds like – a residential building that contains two or more “families,” or units. Real estate investor Steven Taylor Taylor Equities stands behind the value of multifamily investing, so long as you weigh the pros and cons first.

The Cons

First of all, managing a large apartment complex may not be the best first venture for a novice real estate investor with little or no tenant management experience. Problems such as clogged toilets and no heat can be overwhelming when multiplied by the number of tenants in your building. You’ll generally have more personality clashes when tenants complain, make late payments and don’t take care of their units while in residence.

Multifamily real estate can be harder to finance because of shorter loan terms, balloon payments and high down payments. It can also be challenging to sell as there are fewer buyers, and they are usually looking for a cheap property that maximizes their profits.

The Pros

On the other hand, a large real estate multifamily apartment building is almost always occupied. The number of vacancies can fluctuate but is seldom empty. Large visible buildings are easy to find. If your rents are competitive and you take good care of your building and tenants, it is generally easy to find renters. A sizeable multifamily investment will typically help your portfolio grow faster, and more rents mean more cash flow.

If you’re a first-time investor, you might take a unit for yourself to be on hand for emergencies while learning the ins and outs of property management. The building components are more compact under one roof – instead of 20 furnaces in 20 houses, you are dealing with one boiler room that services all of your units.

Comparing the compiling the data to determine if a multifamily real estate investment is the right decision for you is quite a bit of work. However, the right purchase at the right time could yield high profits.

Dahlia Higbee