Real Estate Investing: Multi-Family Homes vs Apartment Complexes
by Nick on Tuesday, January 10th, 2012 | No Comments
If you are interested in becoming a real estate investor, you may entertain the thought of becoming a landlord. The payoff is a bit slower than buying and flipping a single family home for profit. On that same note, rental units provide steady, ongoing income that can last for years.
Investing in real estate does involve an investment. As a reminder, it is considered an investment because, when properly done, you will recoup all upfront money spent and then generate profits from then on out.
When it comes to deciding whether you should buy multi-family homes for sale or apartment complexes for sale, please keep these points in mind.
Purchase Cost & Additional Expenses
Whether you buy a multi-family home with three rental units or an apartment complex for sale with twenty units, always look beyond the purchase price. Consider the cost of needed upgrades, repairs, and ongoing maintenance. As a landlord, it becomes your responsibility (regardless of the cost) to provide all renters with a nice, safe shelter.
As for the purchase price, multi-family homes are cheaper to purchase. With a quick search online with a property finder tool, I was able to find: 1 multi-family home in Syracuse, NY with 2 rental units for $79,000. 1 apartment complex in Syracuse, NY with 16 rental units for $440,000. The return on your investment will be about the same. At this point in time, it is a matter of what you can afford.
Let’s say that you are looking to make real estate investing your career. You are a jack of all trades and intend to handle all billing issues, maintenance issues, and so forth yourself. After all, the less help you hire, the more profits you stand to reap yourself.
In this case, smaller is better. This is particular true if this is your first attempt to profit from real estate investing as a landlord. It is much easier to maintain a multi-family home with 3 rental units than large apartment complexes for sale with 20 plus units.
Should you prove successful in your venture? Great! Then, it is time to consider expanding. Should you prove unsuccessful in your venture? You stand to lose less with a multi-family home due to the lower purchase price and upfront investment.
These are just a few of the many factors you should first take into consideration before jumping into real estate investing as a landlord. Need additional assistance? Consider contacting a few local, friendly landlords in your area. Most would be willing to answer a few casual questions. Do they own and rent out a large apartment complex or multi-family home? How did they get their start? Any words of wisdom they’d like to share? A professional realtor who specializes in commercial rental units can also provide knowledgeable insight.
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Posted in Commercial Real Estate, General Real Estate, Investing Mindset, Real Estate Financing