Multi-family homes are a great real estate investment for those who want to earn extra rental income and increase the value of their property. Consisting of numerous units and shared amenities, multi-family homes include apartments, duplexes, and townhomes.
If you’re thinking about investing in this type of property, here are the pros and cons that you should consider:
Advantages of investing in a multi-family home
- Multi-family homes create more cash flow
Owning a multi-family home gives you an opportunity to increase your rental property cash flow. With the income you earn from renting out multiple units, you can pay off your mortgage and cover any additional expenses. - Multi-family homes are easier to manage
Managing several properties under one roof is much easier as compared to managing single-family homes that are located in different areas. With a multi-family home, you no longer need to travel back and forth to check up on your properties since they’re all in one place. - Multi-family homes come with tax benefits
Rental properties come with certain tax incentives, which cover your multifamily home if you decide to rent it out. You can deduct certain expenses from your tax return such as repairs, property tax, operating expenses, and mortgage interest.Another tax break that you can take advantage of is depreciation. Each year, the physical assets of your property, such as the house itself, diminishes in value due to wear and tear. The IRS allows rental property owners to deduct a depreciation expense from their annual gross taxable rental income.
- Multi-family homes appreciate in value
It’s pretty simple for a multi-family home to appreciate in value. Modest improvements such as extra in-unit washers and dryers, great landscaping, or a kitchen upgrade can boost the value of your property. A well-maintained multi-family home will also increase its value over time.
Disadvantages of investing in a multi-family home
- Multi-family homes cost more
Compared to single-family properties, a multi-family home is more expensive to purchase, especially if you’re buying the entire building. However, the price of a multi-family home also depends on local market conditions and the demand for that type of property. - Multi-family homes have a variety of tenants
Managing tenants is one of the main challenges of investing and owning a multi-family home. As the landlord, you are in charge of keeping the place in top shape, making sure rent is paid on time, and enforcing house rules and regulations. That’s why it’s important to check the references and screen the credit history of prospective tenants to make sure they won’t cause you grief down the road. - Multi-family homes require a lot of maintenance
While maintenance is a responsibility that comes with being a property owner, the obligation is even greater when you rent out a multi-family home. You’ll be dealing with multiple tenants with multiple unit issues that can happen simultaneously. You won’t just have to address the issue at hand, you’ll also have to time inspection and repair according to your tenant’s schedule. If you delay repairs, you may be giving your tenants grounds to terminate their lease agreement. That could result in more frequent tenant turnover and all its associated costs including cleaning, repair, advertising the vacancy, showing the unit, and processing applications, not to mention the lost income.
Looking for multi-family homes for sale in Turlock, CA? Soldavi Realty has all the real estate info and expertise that you need. Get in touch with us at Soldavi Realty today by calling 209.383.3000 or sending an email to a(dotted)diaz(at)soldavi(dotted)com.