The short answer; it should be! Whether you are an experienced real estate investor, a large residential portfolio landlord, or a weekend warrior house flipper, you are missing out on what can be your most valuable investment asset class. Learn the benefits of investing in multi-family property and how to overcome the barriers to enter the market in this blog.
Benefit: Multi-family properties are more resistant to housing market fluctuations
There are many benefits to dipping your foot in the multi-family arena. First and foremost, it is an asset more resistant to housing market fluctuations than single-family investments, they can be more efficiently managed, you have a centralized location of assets and you still can leverage non-recourse government insured loans.
I want to make sure I throw out investing in multi-family is not something you should or can roll out of bed and undertake. There are a few barriers to entry including required experience from Fannie Mae and Freddie Mac before they are willing to hand over hundreds of thousands to millions of dollars, the risk of losing a lot of money by not putting in the time to properly research a potential property, and, of course, increased competition of this very popular investment vehicle.
What I recommend to overcome the first two barriers is to locate a local real estate investment group which focuses on multi-family investing. You are sure to run into a lead investor who has been investing in this class of properties for many years who will be willing to show you the ropes and take you on as a co-sponsor or as a passive investor until you are comfortable enough to take on a property of your own. Having your name on a few deals will also give you credibility with Fannie and Freddie as well as many other lenders and sellers. That’s right, sellers also want to know you have a track record of closing on time and know the lengthy and cumbersome due diligence process, so they are comfortable taking their property off the market for a month or two with reduced risk of the deal falling apart or a buyer not being able to obtain financing. The third barrier of competition is increasingly getting harder to overcome. The multi-family sector has been a hot commodity for investors dating back to the housing crisis in 2008. Many single-family homes were foreclosed on and owners and tenants flocked to apartments to keep a roof over their heads. The demand for apartment housing has steadily increased since and continues to be in steady demand as baby-boomers are wanting a home requiring little self-maintenance and millennial’s are wanting the same with the flexibility to move wherever a job takes them or to explore new scenes.
Benefit: Multi-family properties are assets that are easier to manage
Another benefit to multi-family properties over single-family is your properties are concentrated in one location and one asset. No need to drive all over town to manage the assets, fewer title policies and loan origination fees to pay for, fewer loans to track, fewer insurance policies and bank accounts to manage. Your complex is a one-stop shop for everything. There are also many management companies to help keep your property (your business) running smoothly and they are also tasked with finding ways to manage finances, stay competitive in the marketplace and keep your tenants attended to and happy.
Begin taking steps to invest in multi-family now so you can start earning those mailbox checks. Contact me to answer any questions or to discuss getting started in multi-family property investing: Chris Castillo, Chris@CREfirm.com or 214.281.8633 ext. 404