If you are looking for an investment to make, then buying multi-family units is a good consideration. This is a good income generating source that can be a profitable investment for you. Before buying multi family units, you should consider the pros and cons and see it if is a worthwhile investment for you.
Pros of buying multi family units
Increased cash flow
When you buy multi-family units you are bound to become more wealthy because of the fact that, over time if you still have tenants on the property and the rent collected should be able to pay off for the mortgage.
This means that the property should be able to pay the mortgage from the rental income without you adding any more money to pay for the mortgage. This will give you an opportunity to save more and increase your cash flow.
The owner uses the tenant’s money to pay off the mortgage
Even without cash, the property owner is able to use the money collected as rent to pay off the debt. This is a stress free way of paying for the mortgage with no pressure at all.
Multi-family units have a low risk
There is a limited risk in the multi-family units because of the fact that they serve the basic needs (housing) which is common to all. There will always be people looking for rental properties and are ready to rent.
The freedom to increase rent
When there is shortage of rental residential properties, property owners can be more selective about the type of tenant they want and how much rental income they are looking at when they rent the property. You can take advantage of the shortage of housing, and increase the rent , which means that you can use this window to make extra money off the property.
Ownership of multi-family units is profitable, the property is a good income generating source that is also highly valuable in case the owner decides to sale. When the property is being sold as is with the tenants, this increases the value which means that it will be able to sell for more than other property that is sold vacant.
Since the multi-family units are similar and serve the same purpose, they are much easier to manage unlike the single types of properties. One lawn shared by several families in the same compound, is easier and cheaper to maintain than that of a single type property.
Cons of buying multi family units
Having to deal with several tenants
One of the biggest problem of buying multi-family units is having to deal with various tenant issues that may arise. Such issues may involve resolving conflicts amongst the tenants and repair costs among other things.
Lose money when tenants move away
If for some reason the tenants move away, then your monthly rental income will be reduced which as a result, will affect your mortgage monthly payments as well. This means that your income will be less and you may have to look for other sources of income to service your mortgage.
When the rental market changes
You may be forced to reduce on the rental amount when the tenants become few on the market. This will have a huge effect on your wealth and you will be forced to either have your property vacant for sometime or rent it out a much lower price.
You can weigh the pros and cons and see if it is a worth while investment to make. Buying multi-family units can be a smart investment if you can manage them well.