Yes, I know multi-family properties come with bigger risks, bigger commitments, and bigger responsibilities, but don’t forget: they come with bigger money, too.
The Ultimate Guide to Multi-Family Investing
Part One: Why Multi-Family Properties are an Investor’s Dream
There are a few main differences to understand between single family homes (SFH) and multi-family homes (MFH). These differences are the keys to understanding why every investor needs multi-family properties in their portfolio, if they are truly serious about building their passive income.
Since I know you are serious about building up your income and creating financial freedom, this means that you need to be clear on these things.
Purchase Prices are Not Created Equal
The truth is that you will, in all likelihood, pay more for a multi-family property. But, the individual unit prices will also be lower when buying in a group. This means that, overall, you will get more for your money. Don’t forget it.
Scale and Grow with Ease
If you have focused your energy on single family homes so far, you know it can be tricky business to increase your portfolio and scale your income. Single family homes work on a one-by-one basis, where you must buy one property over and over in order to build up your properties.
Multi-family homes, however, are far easier to scale! Think about it. One single property will contain multiple units, all which offer a rent amount. One multi-family property purchase will bring in several units that increase your passive income potential.
Manageable Management & Maintenance Costs
It might be hard to believe, but you will usually spend much less on management and maintenance for a multi-family property than for a single family home. Typical costs are about 4-7% of gross rent for multi-family property, and 8-10% for single family home. That’s a steep difference!
The reason for this, though, is pretty simple. For a multi-family property, all of the units that needs to be managed are in proximity to each other. There is far less driving all over the place to get to the various units. In addition, when all of the properties are housed in a single building, the costs for building maintenance are only needed once, rather than multiple times for multiple single family properties. A roof can be repaired one time for multiple units, rather than for each individual home.
See the difference? Fantastic! Let’s keep going.
The Value is in the Property
Whenever someone buys a single-family home, there are two things most considered: comps in the area, and the credit/income of the buyer. This is not the case with a multi-family property.
Multi-family properties are assessed based on the income that the property provides. A key indicator for this is the capitalization rate (cap rate). The cap rate is a ratio for Net Operating Income (or NOI) to an assessed property value (or NOI/value). For instance, if a 4-unit multi-family property sells for $250,000 (it’s value) and the NOI is $24,000 (estimating $500 profit after expenses for each unit), the cap rate will be 9.6%.
Ultimately, the higher the cap rate, the better for you, the investor. For more on this topic, go to PropertyMetrics.com.
Real World Example to Drive It Home!
Now, I gave you some nuts and bolts for why multi-family houses are truly an investor’s dream, but I will do you one better. Let me share with you a real life, true to the bone example of this exact thing in action.
Some time ago, I contracted a single family home for a lease option for a price of $122,000. My monthly costs were $800 each month, and I rented it out for $1000 monthly. This means that my monthly profit was $200.
Not long after I made a second contract on a multi-family property, agreeing to a price of $125,000. The property had 5 units, and my monthly costs ran about $800. The rent was only $500 for each unit, but with 5 units that meant I brought in $2500! Even with my monthly costs, I profited $1700 every month.
This is what I mean by scalability. The profits increase quickly when multiple units are involved.
Serious Investors GET Multi-Family Properties
If you are not quite sold on the importance of multi-family properties, yet, no sweat! I’ve got more coming to you in this guide! Parts 2 and 3 will fill you in with even more info to help you in your decision.
But, if you get it and want it, I know exactly what you need. Along with my premier course First Deal Done Fast, I have put together other amazing courses to help you keep growing and prospering in your investing journey! And, multi-family properties have not escaped my sights.
This is why I made Apartment Blitz. It is the best course for you as a serious investor ready to explode your income potential while establishing financial freedom. I know your dreams for your life are incredible, and I am committed to helping you achieve them!
Seriously, I am convinced Apartment Blitz is the best program on the market to teach you how to succeed in multi-family property investing with minimal risk, better protections, and more bang for your buck. If you are truly serious about growing your income potential, check it out and let’s get started!
Bigger is Better for Investors
I get it, y’all, really I do. It can be scary and nerve-wracking to think about the growth you could experience with multi-family properties. But, really, you’re worth it! How big are your dreams? Are you serious about achieving them? Do you really believe that you deserve them? Because, you do. They are achievable, and you can do this.
I believe in you, but do you believe in yourself. With the right tools in your hands, you are capable of the success you desire. Now, get going and do great things! Your future is waiting for you.
What is holding you back from multi-family properties? Comment below and share your thoughts.
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