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Are you thinking about real estate investment? If so, you’ve probably heard about multi-unit properties and why they could be a good solution. Unfortunately, it’s very likely that you have some negative thoughts on them too.
In many cases, though, the fears are a little unjustified. Let’s take a look at some of the common myths and provide some clarity on the situation.
“It’s a great idea, but I won’t be able to borrow”
Perhaps the biggest concern of prospective real estate investors revolves around capital. The majority will naturally assume that securing the funding for a multi-unit property will be harder than ever. In truth, despite the increased costs, the banks are actually likely to lend more money for this type of purchase.
The reason for this is simple: you only need a percentage of the units to be occupied to break even. Even if one unit takes several months to fill, the lender will get their money back. It’s still worth putting a rent guarantee insurance in place as this removes the threat of defaulting tenants. Still, the chances of falling victim to several problematic tenants are quite slim.
Better still, the purchase will be one transaction, which makes everything seem a lot easier. Underestimate its importance at your peril.
“There’s too much work involved”
If real estate investments are a side hustle, establishing a sense of balance is vital. After all, you will need enough time to focus on your primary source of revenue. Multi-unit rental properties may seem like a lot of work due to managing several homes at once, but it’s actually a lot simpler than you’d imagine.
For starters, many of the responsibilities, such as maintenance of communal areas, will be the same for all homes. Crucially, hiring the help of a property management agency allows you to ensure that the tenants remain happy. Moreover, the revenue will keep rolling in without any effort. This creates a very exciting investment opportunity.
Any investor hoping to make serious money from several accounts should consider this route.
“I’ll be tied into one solution”
Another natural fear revolves around the perceived lack of flexibility. AS a new real estate investor, it’s likely that the multi-unit property will signify the bulk or entirety of your portfolio. The thought of being forced to take one route may leave you feeling as though your capital is at risk. But it doesn’t need to be that way.
On the contrary, you can still treat each individual unit as a separate investment. You can invest in the décor of one unit rather than upgrading every property. You can charge different rental prices to tenants based on the condition of the unit and contract length. Most importantly, you can sell individual units to free up some capital when needed. The choice is yours.
Despite the misconception, multi-unit property investments offer plenty of versatility. Managing your assets should be fairly easy.
“The profit margins are too small”
Financial gains are the main incentive for making any investment. Therefore, it’s only natural that you want to maximize your returns. Given that a house will generate greater revenue and profit margins than an apartment, you may feel that houses are the right way to go. This isn’t always true though.
After all, the multi-unit property generates income from several properties. Moreover, the price per unit is far smaller, especially as they are grouped together. So, while the profit per home may be a little smaller, the overall revenue will soar. Moreover, the ROI in terms of per $10,000 invested can be greater. This is the most important metric of all.
It’s important to do your research as there is no one right or wrong answer. But to rule out multi-unit properties altogether would be foolish.
“Finding good tenants is too hard”
As with any buy-to-let property, the quality of your tenants will have a telling impact on the returns. Many inexperienced investors worry that filling many properties will be too tough, forcing them to accept bad tenants. In reality, the demand for apartments outweighs the demand for houses in many cities. In truth, finding tenants should be the least of your worries.
The struggles of the first-time buyer mean that many millennials have to rent for several years. An apartment lets them do this while saving for a future purchase. Meanwhile, the location of your multi-unit property will be another big hit for career minded people. In most cases, there will be many applicants, allowing you to filter out the good from the bad.
Or you can let the property management team do it on your behalf. Either way, knowing that your properties will be respected is essential.