3 Risks of multifamily investment properties
While there are a lot of benefits to getting into multifamily property investment, there’s a reason not everybody can do it.
1. Greater initial expense
As lucrative as a multifamily rental property might become, there’s no denying that the upfront cost is high. Even smaller apartment buildings (two to four units) will cost millions of dollars in the most expensive cities like San Francisco or New York.
And while banks are typically happy to provide a good interest rate to the right investor, you’ll still have to come up with a roughly 20 percent down payment (give or take, depending on the real estate market and the size of the building). Because of this, investing in multifamily real estate is cost prohibitive for many.
We eliminate this risk by grouping investors together in the purchase of the property. 10 investors at $200,000 each = $2,000,000 initial investment into the property. This allows us to buy larger properties.
2. Competition
Because multifamily properties do offer so many benefits for their investors, you’ll likely see interest from experienced investors in a good rental market. When developers and property management companies compete over the same buildings or land, the prices will rise even higher. Some investors can even buy in cash, making it tough for newcomers to break into the market.
While we cannot eliminate all the competition, we can do have an edge with our structuring of the deals and market research that we perform.
3. More to manage
Even if you can swing a down payment and manage to beat out the competition to secure a multifamily property (both huge feats), your work is far from over. Managing multiple units is a huge responsibility that will require a lot of time, attention, and maintenance.
If you’re a first-time investor, are managing more than a couple units, or simply don’t have the time or expertise to take on landlord responsibilities, hiring a property management company to handle the day-to-day tasks is a must.
We take all the responsibility of managing the properties, so you do not have to worry about the day-to-day operations.