Investing in multi-unit residential real estate properties is often seen as a smart move for people who want to be able to generate consistent income. Many people automatically think about things like the cash flow and property appreciation as the main benefits of this type of investment portfolio.
For those who are considering getting into the multi-unit residential real estate property investment scene, there are some other major benefits to consider. These may make this type of investing strategy even more appealing to some.
Economies of Scale
One of the main advantages of investing in multi-unit properties that’s often overlooked is economies of scale. When you opt to purchase a multi-unit property, the cost per unit is often lower than what’s present for single-family properties. This is because the units are all grouped together and in a single location.
Maintenance, upgrades, and management can be done more efficiently when units are all on one property. In many cases, property management or maintenance have a lower cost per unit when they’re in the multi-unit property. This can reduce costs and increase profitability.
Lower Vacancy Risks
When you invest in a single-family property, you don’t make any income on it if it’s empty. If you have a multi-unit property, you can still have an income if some units are vacant and others are empty. The chance of all units in a multi-unit property isn’t high, especially when the rent price is in line with the local comparable properties and the units are well kept.
Having multiple units in the property is an instant diversification of income because it can help to smooth out cash flow fluctuations. This can improve financial stability. Some major multi-unit property investors, such as Patrick Carroll, often tout this as one of the draws that pulls them toward these properties.
Community Impact and Influence
Have you ever noticed that a bad landlord quickly gets a local reputation as a slumlord? You can do the exact opposite. If you invest in a multi-unit property, keep it in good condition, and treat the renters fairly, you can quickly become known as a good landlord.
You also have the ability to make investments that make the community more desirable. This helps the residents, but it can also increase your return on investment because a more desirable community may command higher rental prices.
Taking a look at the benefits and the drawbacks can help you to make an informed decision about how to proceed with a property. Creating a diverse investment portfolio that brings in the income you need.