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Multi-Family Investment Properties — More Tempting Than Chocolate Cake?

Chocolate cake and real estate.  Probably not a combination you think of very often.  Unless, of course, we’re talking about chocolate chip cookies and open houses, which every agent knows is the winning combination.  Wondering how we can link the two?  Keep reading.

Over the past few years, investors looking for single-family rentals have found themselves running into supply issues in certain parts of the county, where institutional investors have scooped up many of the great deals.  That doesn’t mean the smaller investor is out of luck; we just need to think outside the box.

Multi-family investment properties have become one of the most powerful and consistent investment vehicles available to investors of all financial means.  More tempting than chocolate cake, multifamily investment properties boast a number of exceptional characteristics that make them quite irresistible.  Yet, many investors see multifamily properties as high maintenance and expensive, and miss incredible opportunities for excellent returns.

Let’s look at some of the top reasons we believe you shouldn’t rule out multi-family investments:

  1. Limited Supply & Increasing Demand
    According to the U.S. Census Bureau, multifamily new construction is near a 40-year low due to restrictive lending.  At the same time, a large influx of the “millennial” generation is entering the rental market, while baby boomers are downsizing.  Because financing is more difficult to obtain and single-family home prices are rising, we are seeing a shift towards rentals.
  2. Survives Most Economic Cycles
    Even during times of economic downturns, homeowners turn to renting and renters cannot afford to buy.  Your multifamily property will rarely sit completely unoccupied.  This means you’ll also have time to find quality tenants rater than accepting the first person who submits an application.  Multifamily properties also tend to have greater resiliency in holding their values during market downturns.
  3. Lower Vacancy Rates
    Vacancy rates are an excellent indicator of potential ROI.  In fact, they are one of the factors we consider which predicts the best markets in the country for rental property investment.  Historically, multifamily properties maintain a structurally lower vacancy rate than other product types.
  4. Cheaper by the Pound
    It’s just simple math.  While the big initial price tag may be hard to swallow, your price per unit will be much lower than it would be if you were dealing exclusively with single-family properties.  Not to mention, you’re collecting rent on a number of units rather than one, which can help you pay down the mortgage quicker.
  5. A Tried and True Method
    Investors have chosen multifamily properties for decades, and there is still a large base of tenants who are looking for multifamily homes.  In fact, a recent study by the National Multifamily Housing Council reports that just one-third of rental properties are single-family homes, while 63 percent are multifamily.  There’s proof in those numbers.

If you’re running into speed bumps as you attempt to join the overcrowded single-family rental market, consider multifamily investment properties.  Jumping to conclusions about multifamily homes might mean missing the investment of a lifetime — and we all know that chocolate cake is just too good to resist.

  1. Comment by Troy C
    October 14th at 2:24 pm 

    A definite option to consider since my first single-family rental experience hasn’t been the most pleasant. I really like the idea of multiple units which will help cover the times when some units are vacant. With single-family, they are either 100% occupied or 100% vacant. A multi-unit provides lower vacancy rates over the long term. This principle is probably the single most important factor to me for consideration of a potential multi-unit investment!

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