We’ve all heard the dictum about the dangers and risks associated with putting all our eggs in one basket so many times that you would think when it came to real estate investment few sane people would want to place all their investment in a single-Family property.
Yet many of the people I meet in the courses I run have exactly this kind of approach which shows, perhaps, just how powerful market conditioning can be. Most of the real estate moguls we get to hear about tend to be single-Family property types (with the exception perhaps of Donald Trump who has taken the eggs in the basket dictum very much into account in everything he has done) and this tends to brainwash us into thinking that either this is the only type of real estate investment available to us or that this is the only type of real estate investment there is.
The truth is that investing in multi-family properties spreads the risk of your investment without drastically increasing the costs and, in addition, allows you to create a built-in buffer against an apartment or two going vacant at some point (which is always a risk you need to be prepared for).
With a single-family property should the tenant’s personal circumstances change you may well find yourself missing out on a couple of months of income which is enough to wipe out your profit from that property for the year.
The risk of this is spread thin with a multi-family property however where a tenant or two moving out does not affect your monthly income from the building enough to seriously jeopardise your annual profit and that is one of the beauties of investing in multi-family properties.
Couple it to the fact that thanks to popular misconception you are competing with fewer other real estate investors for the choicest properties than if you were active in the single-family home market. This is not to say that you should develop a mindset which specifically looks at multi-family properties to the exclusion of everything else.
Far from it. Good business is where you find it and as a real estate investor who has bought single-family homes to flip (indeed I started out my career in real estate investing with a single-family home) I can tell you that if you come across a good deal or need to buy a property to flip quickly so you can invest in an apartment block you should never overlook the possibilities offered by the single-family property, much as you leverage multi-family ones in order to build up a portfolio that will guarantee you never have to work to someone else’s schedule ever again.
David Lindahl, also known as the "Apartment King" has been successfully investing in single-family homes and apartments for the 15 last years. He has rehabbed over 820 houses and currently owns over 7,232 apartment units. He is the author of three best selling books. Dave Lindahl is a regular guest speaker at CT REIA. Go here for the current list of upcoming real estate investing seminars in Connecticut.
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