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INVESTING IN FLORIDA MULTIFAMILY APARTMENTS: ADVANTAGES AND DISADVANTAGES
Posted on July 2nd, 2019
Multifamily apartments, housing systems consisting of different units of the house for residential use under single or multiple buildings within a complex, are the new craze in the investment world. Starting from investment websites, podcasts to real life investment advisors, everyone is advocating the investment in multifamily apartments. And honestly, they are not wrong in doing so, because statistically, it is one of the best forms of investment available currently. But, often this advice doesn't come with a warning label and it should.

Advantages:  Multi-Family Properties offer many advantages to real estate investors. Generally, they provide an opportunity for substantial cash-flow if you chose the right one.  Depending on your level of risk, and whether the property is in need of repair at the time of purchase you can reap huge benefits from this type of investment.  You can make money by renting the property for an amount that covers the monthly debt service and maintenance, and/or you can improve the the property, rent and hold the property and then cash-out when the property increases in value.  So long as you can rent the property at or above the cost it takes to run the property then you will most likely win with this type of investment.  Investing in Florida multi-family properties doesn't come without risk and there are things you should be cautious of as well.

Problems with Multifamily Apartment Buildings:
The multifamily apartment building business has become a mega-trend and is being followed by aggressive investment from all over. The idea of buying a multifamily apartment, staying in one unit, and renting the other units is attractive to the business minded people. The demand is setting the prices higher than ever, with it, the investment is getting more expensive. So, getting just the right return on investment (ROI) is not just a yes or no decision anymore, there are other variables to consider which decide whether multifamily apartment building investments are right for someone or not. 

●    Complicated Management: The math is much simpler when you're managing single-family properties. Management of rent, apartment repairs, security issues just get easier with single-family properties. It's easier to manage and keep a good tenant with single-family properties. With the higher prospect of getting more out of your investment, you also get more worked up through managing multifamily apartment buildings. So, if you are someone who wants to wrap your head easily without complications, you shouldn't consider investing in multifamily apartments because it's bound to get you worked up.

●    Strict Government Regulations: Firstly, government regulations that already exist make it hard for investors to get multifamily apartments for less expensive rates. New research from the National Association of Home Builders (NAHB) suggests that regulations that are being imposed by the government can account for up to 32.1 percent of multifamily apartment development costs. The number can reach as high as 42.6 percent in one-fourth of the cases. Apartments and condos are subject to costs that are regulatory, including standard requirements, different fees at different stages of development. Secondly, switching to multifamily apartments opens closed doors to our government, especially when we are raising money from others to fund it. After buying multifamily apartments, the government also dictates with intricate details about what we can do and cannot while we raise money for its investment. With little to no understanding of the legal complications, you could end up in jail.

●    Under letting: An important role of an investor is to get the best value out of a property. Since the multifamily apartment business boomed, the market has changed a lot. A lot of markets with options of buying multifamily apartment buildings give really good value but the price has been rising and it's very hard to find a good value for a multifamily property. It's especially hard compared to single-family properties since there are so many fewer options when it comes to multifamily properties. If you are going to take a loan to buy a multifamily property (which is a smart thing to do, in most cases) and overpay for the property's price, then it's impossible to repay the loan. So, the risk associated with loan management alongside an uncertain market is high, making it one of the reasons for multifamily apartment deals not working.

●    Bad Market: Every multifamily investment deal that you come across shall not be great. There are properties that are just in the wrong neighborhood, and even if they have everything under good management and quality it won't suffice. Quality of the property, the neighborhood, rent history, crime rate, tenant quality is just some of the variables that must be right in order to ensure a great deal. Only getting a multifamily property for cheap won't bring out good Return on Investment (ROI). That doesn't just stop right there, because even if you can check all these boxes and still the property doesn't have the right demand in the local market, then the investment is bound to fail.

Getting the Best out of Multifamily Apartment Buildings: Even with all the problems at hand, I’d say multifamily properties are the least risky. That’s only if you know your way around the problems of multifamily apartment buildings:

●    Having a Scalable, Organized System: It's important to keep in mind that a standardized system makes things less complicated. Multifamily apartments by nature are more complicated than single-family apartments and need way more supervision and organization. When your units will start to grow you must start streamlining workflow by keeping track of the tenants. There are dedicated software that can help to organize the day-to-day tasks of multifamily apartment buildings, making the math way easier. 

●    Planning and Evaluating: The government restrictions and regulations are tough on businesses and investors alike. There is no way around it, but with precaution, you can make your investments safer. There are law firms that you can go to in order to keep everything in check and to avoid potential lawsuits or jail time.

●    Loan and Insurance Advantage: Loans can be hard to get, especially if you are going to invest in single-family properties. You won’t have to do the paperwork of 20 different loans for your 20 unit building, and it’s just one loan that you have to deal with that makes the whole process easier. It’s the same when dealing with insurance companies. Insurance companies can make your business life harder by showering you with hundreds of paperwork only for it to never come handy!

●    More Cash Flow: The craze of buying or investing in multifamily apartments is not a fluke, because if purchased right it can generate cash flow almost instantaneously. Even though the problem of under letting remains, if you’re smart you can take advantage of the ripple effect of multifamily apartment buildings. For example, if you increase the rent at a certain small rate for all the tenants, they wouldn’t mind. But, you’d be benefiting from the aggregated rent.

●    Proper Market Research: You can avoid bad market just with proper market research. To successfully do so, you must take an honest look at your business first. You must first know the rent history of the area. The neighborhood crime rate is an important variable here as well. The quality of the property must be checked as well. The environment inside the building must stay convenient for all the tenants. For that, you must introduce periodic apartment unit inspections, which will allow you to screen your tenants. Then you must evaluate what we have to offer to our tenants at what rate. Only by comparing everything, you can settle at an ROI.

The goal is to run the numbers for yourself and decide whether you want to invest in multifamily apartment buildings. Because it's never as simple as just yes or no. Multifamily properties are not for everyone to buy, although with proactive measures and a certain level of precaution it will not be hard to generate profit from it, because to date this kind of investment remains unscathed in the real estate market.

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