Invest – Why Invest In Multi-family Homes
- July 7, 2020
- Posted by: Jim Pellerin
- Categories: Control, Educate
Another property type that you can invest in is multifamily homes.
A multi-family home is where more than one family can live in the building. Those are properties like duplexes, triplexes, fourplexes, and it keeps going up, but usually, it’s those two, three, or four-family buildings that I’m referring to.
The advantage of owning a multi-family home is that you get multiple rents.
It’s because of the economy of scale that they can usually cash flow better too.
For example, let’s say you have a duplex and you purchased it for a $100,000. And let’s say, you’re getting rents of $700 or $800, or even $1,000 rent for each of the units. And what happens if you’re expenses for carrying the property are say $1,400. The total rents on that property would be $2,000, so cash flow is a lot better than a single-family home.
I mean, those are just examples, right? But I can usually make a lot more cash flow when I own duplexes and fourplexes. I’ve had several of those over my career.
The disadvantages of owning multi-family homes are that you can’t usually assign some of the upkeep to each of the individual families. For example, if you have a fourplex it’s hard to say that you have to mow the lawn or that they have to share in the maintenance and upkeep of the building. So, you do have a little bit more maintenance because you have to take care of the common areas, unlike with a single-family home.
With single-family home tenants I usually tell them that they’re responsible for the plowing, for maintaining the lawn, for maintaining the yard or any type of maintenance and clean up around the building.
With a multi-family home. you can’t really delegate that to your tenants because it’s a shared type of environment. And you can get into things like tenant squabbles with multi-family homes.
I’ve had problems with tenants complaining about the other tenant taking up too much of the driveway, or parking too many cars or having late-night parties. Because they are attached and they’re in the building. So, you may get noise complaints from neighbors. So, there is an overhead to managing that.
But that being said,
if you qualify and pick the right tenants, you shouldn’t have a problem.
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