Since multi-units cost more than single units, the profit that is earned at the time of the sale is also greater because of the appreciation accumulated from the acquisition price. If a $120,000 single unit house appreciates at 10% it will be worth $132,000 as opposed to a multi-unit apartment with a price of $320,000 that appreciates at 10% will be worth $352,000, which ends up being $20,000 more. Another thing to take into consideration when looking to invest in multi-units is that there is less competition when comparing it to the market for single units. There is a lot less competition than there is in single family houses. Why? Because no one is out there teaching how to do it and all the single family guru’s make flipping single family houses sound as easy as chewing gum in the dark (Lindahl 2011). obviously, investing in a market where there is less competition increases the opportunities to make a profit.
Investing in a multi-unit place might be easier said than done, as there are a couple important things one has to take into consideration in order to minimize risk and maximize profits. It is not just about securing a loan, purchasing a building, housing a few tenants, and watching the money pour in. In order to minimize risk as much as possible one has to due diligence and perform a thorough rental market survey. It is imperative for investors to incur about rental market trends for apartment vacancies, cap rates and future developments that might have a positive or negative effect on the property. When scouting for a potential place to invest, it is important to look out for rental signs and ads. These may be clues that rental units are down. However, if it is the opposite then it can be a good place to invest. If an investor is going to take the plunge into investing, then it is important to learn the fundamentals.
Overall, there are many advantages when it comes to investing in multi-unit apartments. Savvy real estate investors have multi-units as part of their portfolios along with single-family units (Koonar 2009). For young investors who are skeptical about investing in a large project, they can always start off with small single units until they gain the experience and knowledge necessary in order to succeed in real estate investing. Once they have the confidence and are looking to make serious money, then including multi-units to their portfolio will be a smart choice.
Kim&Charles Petty. Advantages Of Investing In Multi-Units. Retrieved from http://www.reidepot.com/articles/Petty-Charles/Advantages.html
David Lindahl. (2011)The 5 Money Making Advantages Of Multi-Unit Investing. Retrieved from http://www.reiclub.com/articles/multi-unit-investing