Beginners in the real estate business usually start with house flipping or buying a single home – one property, one location is the common starting point. Very rarely do budding entrepreneurs start with multiple properties. However, some do chance upon a property that can accommodate multiple families. These can be in the form of apartment units, duplex houses, or a mid-rise condo building.
Multi-family rental properties can be a great investment. Landlords have the luxury of maintaining an income-generating property in one location. However, multiple homes can mean more hassle. Each family will have their own needs and behavior. Each family will come with their own set of unique challenges.
Your income multiplied
Having multiple rental units in one property location means that each unit has its own earning potential. Your income is multiplied by the number of units available to rent out. For example, single-family rental home with 2 bedrooms might go for $4000 a month. But if you have 4 multi-family rental units, with each unit going for $4000 a month, that is easy $16000 a month in income. This, for most landlords, is an excellent deal.
Having multi-family rental units in one location is also a huge draw for landlords. There will be no need to drive to different areas and there is only one location to manage. The multi-family rental units are often housed under one building. More often than not, the multi-family rental units share one roof, share walls, and are enclosed in one lot. For the most part, repair issues concerning the facade and outside of the property will be easier to manage. The challenge comes with the individual multi-family rental units.
What challenges does a multi-family rental building entail?
Multiple tenants mean multiple issues and unique challenges
For single-family rental units or single detached homes, the rental process is simple and straightforward. It follows a linear progression and you only have to do it once. However, for multi-family rental units, each unit will have its own application process. You will have to conduct screenings for prospective tenants and follow through with the whole process (documentation, background checks, etc) up until lease signing. Then you have to start the move-in process. Then you have to schedule regular maintenance. With multi-family rental units, you have to do this process for each unit. The more tenants you have, the more times you have to do this process.
Take note that there will be slight differences with each tenant as their requirements are unique. Some tenants may only require a short lease, some might stay for longer than the lease term. Some tenants might require ground floor units because of their unique family needs. Some tenants might require furnishing, while some may already have existing furniture. Each family might require a slightly different arrangement from the next. Make sure you are clear on what you can and cannot accommodate from the very beginning of the negotiations. You can be strict and have a standard set for all tenants regardless or needs, or you can make slight concessions. Bear in mind that a harmonious tenant-landlord relationship is about give and take.
All that floor space to take care of
You may have bought a single building but what you really have is multi-family rental units within the same walls. The lawn care and outside maintenance are easy enough. After all, there is just one lawn, one backyard, one gate, etc. Your lawn maintenance service provider can take care of that well enough on a regular basis. However, the challenge arises when doing repairs. You would have to contend with repairs inside each individual rental unit. Oftentimes, it does not stop there. For example, a leak on one of the higher floors can seep through the ceiling beneath and cause damage to the lower floor. An infestation in one unit can spread to another unit, or worse, the whole building. A crack on the wall can run down another multi-family rental unit. If not addressed, this can serve as ingress for water and can cause water damage. Since these multi-family rental units are part of a whole, you should be able to make repairs inside the unit and also have the foresight to plan for how it will affect the rest of the property. In short, not only will you repair individual units but you’d also have to plan for building-wide repairs and maintenance. The challenge is to manage individual spaces on top of taking care of the whole building.
Do you have all your eggs in one basket?
If you own multiple properties across an area, you are more likely to survive issues regarding rent fluctuation, zoning permits, or repairs due to natural disasters. However, if you have a multi-family rental building in a single location, your rental income will be affected by any issues that result to being in that particular neighborhood. What’s more, all your tenants will experience the same challenges if something happens to the neighborhood or the area around it. It’s like having all your eggs in one basket.
Sure, it can be quite a challenge to own and manage your own multi-family rental property. You can make it easier with the help of a respectable property management company. A reputable one can help you get organized and start managing your multi-family rental property. Your chosen property manager can help you screen each potential applicants and choose the best fit for your property. They can help you find local service providers to help you with ongoing repairs, inspections, and maintenance work. They can hook you up with local experts in lawn care, plumbing, electricals, etc. You don’t have to do it all by yourself. With an excellent property management company, you can sit back and reap the benefits of owning a multi-family rental property. Give us a call today and learn how we can help you. Call us on 425-658-7471 to schedule a consultation.
Davis Property Management
At Davis Property Management, we provide fast, friendly, and professional service tailored to your individual property management needs.