Why Multi-Units Offer Maximum Profits

Very few first-time real estate investors have a lot of money to get started. So to gain a foothold, they buy single-family homes and hope to expand from there.

Sounds logical, right? Maybe yes, maybe no, because there are many reasons why investing in smaller multi-family homes or apartment buildings offers a better way to start, provided you know how. There’s a very simple reason:

Leverage

It’s the near-magic principle of letting other people's dollars work for you. Let’s take a quick look at some advantages of multi-units:

They provide multiple income streams and enhanced cash flow. If you analyze the rent roll and fixed expenses on the properties you’re considering and buy wisely, you can sit back and watch your tenants pay your mortgage for you - and pay for their own heat, building upkeep and other expenses. Meanwhile, your building is growing in value. 

You generate positive cash flow shortly after you invest. If you buy a building that doesn’t require extensive renovation, you can have paying tenants in place soon. Perhaps they will already be in place when you buy the building. That’s a far cry from buying a single-family fixer-upper, which might not put a cent in your pocket until you sell it.

You get more value from every dollar you spend on upkeep. If you own and rent out five single-family homes, you have five furnaces to maintain and five roofs to replace. But if you have five tenants in one location, you only have to maintain one property.

It is easier to sell multi-units than one-family homes. Investors see them as sources of positive cash flow, not as investments that need to be improved before they can be sold. The result? People will line up to pay top dollar for a profitable multi-unit, even if the real estate market softens.

And there’s another significant advantage. Because multi-units yield excellent cash flow, you can hire a management company to manage them. That lets you use your time to locate other investments - or to enjoy the money that your building is earning for you. So you are not only leveraging your money - you are leveraging your time too.