If getting a foot into the property rental industry is your main mission, you’ve probably considered the idea of managing a multi-family home. Designed to house multiple families in various units within the structure, multi-family homes come in many forms (duplexes, triplexes, and even some flats can also be considered multi-family properties). Must be quite the dream project for an Interior Designer/Decorator.
Trust us when we say that there are various reasons to consider investing in a multi-family home, but also listen when we exclaim that these are not the ideal investment opportunities for everyone.
As usual, we’ve done the research to aid and inspire you…
Managing more than one household in one property will definitely result in a bigger cash flow. That is assuming that every family pays a margin over the real expenses of owning and operating the property, which means each additional family will just push up your income (and profitability) even more.
Trying to juggle multiple mortgages can become a headache quite fast when dealing with multiple loans and lenders. Multi-family homes is the opposite, because purchasing one multiple-family structure with one mortgage means far less paperwork than for two single-family houses.
Managing two or more units means there’s less of a risk for a complete vacancy (and zero income for you). Even if one occupant moves out, the other tenants will still be there to continue the cash flow while you find a replacement. And it is quite unlikely that you’ll be dealing with multiple difficult renters simultaneously.
Whereas single-family properties are often priced according to trendy designs or the location, multi-family homes are priced almost primarily on their potential to generate income. And as they are purchased and sold chiefly as investment pieces, in many instances they have more stable long-term growth.
You won’t necessarily be expected to pay exactly twice as much for a two-family house as for a single-family home. But when you start considering homes with more than one unit, prices tend to rise.
If this is your first venture into the world of property investments, or your budget is rather strained at the moment, perhaps a multi-family structure is not your best bet.
Every individual unit means more management responsibilities and time from you. And if there is a problem at the property, it’s likely that multiple units/tenants will be affected (i.e. no electricity or a burst water pipe). This might mean heftier maintenance- and repair costs, too.
Managing multiple tenants on one property could definitely have its own problems. There are more types of complications to consider, such as everyone complaining about one noisy renter. And if a structural problem is found, that might lead to occupants leaving and could even drive down your property’s value.
Being the landlord of a single-family home already means having to deal with multiple regulations about how the property may and may not be rented. For multi-family homes, regulations could be even stricter.
It is strongly advised to do proper research about the applicable laws, and to contact someone at your local council in order to avoid future risks and/or fines.