I love discussing anything to do with owning real estate, but I am passionate about investing in residential property. Let me tell you a little about my story:
After buying my first home in 2002, I quickly set out to learn as much as I could to increase the return on my investment. I enjoyed studying the best ways to add value and livability to the house. I started small by converting my garage into an office space/living area. Since this worked out so well I set my sights bigger and tackled modernizing the kitchen which included moving the washer/dryer to a new space and opening up a wall. These rearrangements dramatically changed the very small space to be more inviting and usable. Over time, enough equity was built up to purchase a bigger home in a community with a great school system for my children. Again, we tackled some projects and soon after that, I was able to transform our residence into a rental property and move into another home.
Becoming a landlord really got me hooked though. I was ready to “go all in” into this real estate game. I constantly dreamed of building my real estate empire. My hobby went from mere avocation to become my passionate vocation when I got my real estate license. Now I feed my desire to continually increase my knowledge of RE investing while growing my property portfolio.
In my experience with those initial investments, I very quickly learned that if I wanted to scale up it is was much easier to manage one eight-unit building instead of eight single-family homes. There are many reasons why I now prefer growing my multi-family apartment-building portfolio, but first let me define what multi-family is:
Multi-family can mean anything from a tiny duplex (two units) to huge skyscrapers with many hundreds of units in a single property. It doesn’t matter where you are on that scale since now you can work both ends of it to diversify your investments.
Recently I started investing through my self-directed IRA into a 500+ unit syndication opportunity where I am one small investor alongside many other investors that are being led by a sophisticated general partner. Plus, I also am always looking to buy and/or partner up with others on smaller 8-16 unit apartment buildings where I can be the general partner. Doing both these investment strategies spreads my risk and allows me to gain even more experience on bigger projects.
Let me explain 3 reasons that I invest in Multi-Family Properties
Economies of Scale
In the end, it saves time and money. When I need to visit my properties, I don’t have to travel all over a large area to see many houses. With one trip I can go quickly and economically to each building that has many of my units. When I need to have a roof fixed, hire a landscaper, or whatever, the cost per unit is lower for multi-family properties instead of each single-family residence. Plus, when you have enough cash-flow from your units, you can pay someone to look after the building/s for you on a part-time basis or even hire an on-site manager.
Reduction of Risk
When a single renter leaves, I am not stuck with zero income. When a tenant doesn’t pay their rent or moves out, my multi-family property still has other tenants providing cash-flow so my bills keep getting paid. It’s more financially survivable to have a period of time with one, or maybe two, units vacant. Unfortunately, it’s more of a struggle to survive long periods of time if the sole renter in my single-family home vacates or quits paying the rent.
Improvements only go so far to increase the bottom line. With a single-family rental, I can only do so much to raise the value of the property, and remember, it’s only one unit. Instead, upgrades to my multi-unit properties end up adding a lot more value because each investment is borne by many units and affects many too. Sometimes even minor changes result in the ability to charge higher rents. Also, whatever amount you increase the rental prices can increase not only your net operating income but also increases your property value even more.
I firmly believe investing in multi-family residential property is the quicker path to financial freedom because of the synergy between its economy of scale, reduced risk, and forcing appreciation. At the end of the day, isn’t financial freedom what we all want?
Even in today’s RE investment market, there are deals out there in whatever area of real estate in which you hope to invest. For a good deal, you simply need to know where to look or browse long and hard enough. If you want a passionate professional who can guide you to your next investment opportunity, I hope you will reach out to chat with me. Remember: