In The Corner

Why Investors Should Think of Getting a Multi-family Unit Investment

Multi-family Unit Investment When planning to get a small balance loan, many investors make one crucial mistake. That is ignoring multifamily loans and instead choosing the more conventional single-family loans. Experts say that this probably due to the myths associated with multifamily apartments — tenants always keep moving, the higher risks involved compared to large units, and much more.

Freddie Mac released a report showing that 31% of home renters stay in multifamily units. Therefore, investors should not be worried as these small units present right investment areas where investors can make a solid return. Here are some benefits to convince you to invest in multifamily units:

Economies of Scale explains that multifamily units enjoy economies of scale compared to single-family units. For example, single-family unit investors tend to have more expenses in management fees since the unit might be in different locations. This means that the economies are centrally located rather than in different places. In addition, it's less costly to repair a single roof compared to six different roofs. Discounts in electrical, plumbing, and general maintenance are also available.

Increased Income

A multifamily unit will bring more income than single-family units. A vacant single-family unit brings nil income, while a multifamily unit finds complete vacancy a rare event with its high turnover seasons. In fact, when the vacancy is low, owners can take the time and renovate the units in preparation for the next occupancy.

Selling Price

The price of a multifamily unit is significantly higher than a single-family unit. A single-family unit is bought at 200,000 and a multifamily loan is bought at 800,000. If sold on the same day, the single unit gives a profit of 40,000 while the multifamily unit gives about 160,000. This includes the fact that it costs less upfront to sell a multifamily unit.

Investors are encouraged to take up multifamily units and make better returns on their investments. For financing, there are small-balance multifamily loans to serve as your stepping-stone to a great investment.