The multifamily investing transition is one which both intrigues and and frightens many single family property owners. Sure, you’d like to try your hand at the game but you’re uncertain it’s the right move. That’s okay because it’s a totally natural inclination and you might just find it an interesting transition. But, you should definitely know what you’re getting into before you make the leap.
Multifamily Real Estate Investment Advantages
There are several reasons why apartment building investment is so smart. First and foremost, if you already have more than one single-family property, you can say goodbye to the hassle of going from one to another. If you invest in a multifamily complex, all the units are on one single site. Plus, you’ll collect multiple rents rather than just one or a few.
Generally, there are more positives to multi-family investing than negatives when compared to investment in single-family homes. However, the challenge in making the decision can come down to your situation when you’re making the comparison. If you already own several homes, selling them to move the assets and past gains over to apartments can be a non-event tax wise if using the 1031 Tax Deferred Exchange.
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Then, there’s the fact that commercial property holds its value very well. Keep in mind, when the residential median prices rise, locals will look for more affordable alternatives. Plus, there are some nifty tax advantages to owning an apartment building. Furthermore, since it’s a larger asset, it’s better leverage to future acquisitions as opposed to single-family.
How to Manage the Single-Family to Multifamily Investing Transition
If you are considering making a change from single-family to commercial multifamily, you should have a basic understanding of how to go about the process. Here’s a brief overview of how to manage the single-family to multifamily transition:
- Do your homework first. You really need to get in-the-know about the difference between residential and commercial real estate. There’s a lot more nuance when it come to codes, zoning, access, and a whole lot more. It’s just a totally different dynamic.
- Consult your management team. If you already have a property management service, you should definitely take the time to ensure they can handle a bigger property. If not, get with an experienced commercial real estate professional to find a good fit.
- Speak with your investment partners. Most single-family property investors simply don’t have the resources to buy a large commercial entity. If you have investment partners, let them know about your interest in making the switch.
- Take the first step only when you’re ready. Of course, you should be comfortable with making the leap from one to the other. Only when you’re ready should you start to get serious about changing.
If you’d like to learn more about commercial real estate investment benefits and more about the acquisition process, please contact me.