Multifamily vs. Single Family Investing -Which One is a Better Fit for You?

posted on : August 13, 2024 0 Comment

Source: Apogee Capital

Ever since we started investing in real estate, we had friends approach us and share how they too were interested in investing in this type of asset class. After a number of these interactions, we began to see a pattern in the conversations.

Someone would begin the conversation about how they had heard about the benefits of real estate but they did not have the time to manage a property, patience to deal with difficult tenants or knowledge to identify a profitable deal.

Having been landlords of single-family homes ourselves, we understand firsthand the challenges these individuals were considering. We have seen many people who have made a real estate purchase that did not turn out as they expected either because of problems with the property or tenants. This resulted in them not achieving their expected returns or simply being more stressed and frustrated than what it is worth.

One alternative to this dilemma is passively investing in real estate deals.

There are numerous ways to do this, but we want to mention just a few of the benefits specific to passively investing in a commercial multifamily property. First, you have the economies of scale that come as the result of investing in multiple units. When you are invested in say 50 units instead of 1, should one of the units be vacant for an extended time or a large expense come up you still have 49 other units producing income during this time. This means that you are losing 2% of your income instead of the 100% that you would lose if this happened with a single house.

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Secondly the acquisition, management and disposition of the property can be handled by knowledgeable professionals. When you are flying in a plane and suddenly enter an area with large turbulence, you do not start saying “I sure wish I was piloting this plane right now!” Why not? Perhaps because the plane is being flown by a pilot who has the knowledge and experience to successfully navigate this difficult scenario and your safety is truly best placed in his hands.

While investing is certainly not too difficult for any individual to learn, there are strong merits with placing your hard-earned money in the care of those who best know how to handle the turbulent situations that are sometimes encountered in real estate investing. Multifamily investing employs a team of professionals that includes not only the syndicator but also the property manager, real estate attorney, CPA and others.

Finally, multifamily offers the opportunity to passively invest in a recession proof asset class. Based on a CBRE research report, “multifamily rents have outperformed those of the other major property sectors during and after the 2008-2009 recession in three ways. The sector experienced the lowest level of rent decline, the fastest recovery to pre-recession peaks and the longest post-recession period of rent growth.”

We know that people have to have a place to live which supports the demand for attainable housing regardless of economic conditions.