Multi-Family Real Estate Investing — Why You Should Invest
It seems like everyone in Utah is investing in multi-family homes right now — the authorities issued 465,000 building permits for these homes in 2018 alone — and with good reason. Sure, the stock market provides lucrative returns, but it’s way too volatile. Single-family homes also prove profitable, but there’s too much risk. Some of the world’s most successful people built their wealth from multi-family real estate, and you too can capitalize on this trend. In this guide, learn why multi-family homes are possibly the best investment you can make in Utah.
Single-family Homes vs. Multi-family home
Multi-family homes are residential properties that contain multiple housing units. These units can be next to each other, behind each other, or stacked on top of each other. They might consist of one building or two buildings or several buildings. There’s no specific determination for multi-family homes in Utah, but they share the following characteristics:
- Each unit has a separate address.
- Each unit has its own entrance.
- Typically, each unit has its own kitchen, bedrooms, and bathrooms. However, sometimes units share communal areas.
Multi-family homes are usually:
- Apartment buildings
- Student apartment buildings
Single-family homes, on the other hand, are residential properties that contain one housing unit. There might be multiple people living inside these properties, but there’s just one “household.”
The benefits of multi-family properties in Utah
Property investors view multi-family homes as the ultimate investment for the following reasons:
Greater cash flow
Multi-family homes have multiple housing units, so landlords make more rental income. It’s as simple as that. Some multi-family properties might contain five, 10, 20, 50, or even more housing units, allowing for much greater cash flow than single-family homes.
Recommended reading: Landlord Insurance Tips That Can Save You Money on Your Rental Property
There’s less risk
When tenants move out of single-family homes, the property might stay unoccupied for days, weeks, or even months. During this time, landlords won’t receive rental income and often experience a financial loss. Multi-family homes, however, generate rental income from many housing units. If tenants move out of one unit, landlords still receive income from tenants in other units. This will still impact cash flow, of course, but landlords have several income streams at the same time.
Greater potential for property management solutions
Although property management benefits landlords of both single-family and multi-family properties, there’s much greater scope for landlords of multi-family homes. With more cash coming in, these landlords can afford a property manager to screen tenants, handle maintenance, and facilitate all the other tasks associated with the day-to-day running of properties. This allows landlords to focus on other areas of their business without worrying about administrative responsibilities.
Cheaper maintenance costs
If a landlord has multiple single-family homes in Salt Lake City or across Utah, they need to manage properties in various locations. The landlord requires contractors — plumbers, builders, electricians, etc. — in all of these locations, and this is extremely expensive. Now imagine a landlord has multiple housing units within the same property. There would be one fixed, centralized location for repairs and maintenance, which could bring down costs significantly.
Less volatile than the stock market
People often think the stock market is the best place for investments, but this isn’t always the case. Stocks fluctuate and pose significant risks to investors with little experience. Investing in multi-family homes still comes with risk (like any other potential money-making opportunity), but the real estate market is far less vulnerable than the stock market. People will always require a place to live, and there has been a significant increase in demand for rental properties across the US over the last few years.
How to invest in Multi-family Homes
- Calculate the return. Work out expected rental income and other revenue (storage fees, parking fees, etc.) and offset this against any expected expenses (repairs, for example). This determines whether multi-family investments are right for you.
- Think long-term. Work out how long it will take for you to generate a return on your investment. How long until you pay off your mortgage? Will the property increase in value?
- Understand your responsibilities. The federal and Utah governments require you to maintain a safe, livable space for all your tenants. This means regular maintenance and problem resolution management. If you don’t have the time or resources to do this, consider a Utah property manager.
As you can see, multi-family real estate investing can be lucrative. If you are looking for a long-term investment, these properties generate more cash flow than single-family homes, come with less risk, are cheaper to maintain, and are less volatile than stocks. Multi-family properties also offer great potential for property management solutions like Wolfnest.
As one of the best property management companies in Utah, we take care of all the tasks associated with multi-family homes, such as marketing, tenant screening, rent collection, maintenance, inspections, and much more. We provide you with peace of mind.
Call us today or learn more about property management for multi-family real estate investing!