In this first post about apartment buildings as investments, we will be exploring the myths that they are more risky than investing in single family houses. So, a lot of folks think that the smaller real estate investments such as houses or mobile homes are less risky than apartments which couldn’t be further from the truth. What we want to do is debunk that myth here and discuss why it is or isn’t the most or less risky investment out there. You can either invest in apartments with your own cash, or you can raise money with partners in order to acquire the buildings.
Single family homes versus apartment buildings as investments:
With single family homes as an investment, you only have one unit that you can rent or lease out to a tenant or family. My friend over at Gwinnett Bankruptcy Attorney talks about this a lot. If that tenant decides to move or if they lose their job, then the home will go vacant with zero income coming in to offset the expense. That leaves you with a dead weight mortgage payment to pay for by yourself or your business. With an apartment complex or a small multi family building, the risk is spread out over the diverse set of tenants and units that you. have. To put it into perspective, if you lose 1 tenant in a 10 unit building, then you still have 9 tenants paying rent and it won’t kill you in contrast with a single family home. All your eggs are in one basket with a single family home and therefore ends up being more risky some investors would say.
For the future, the outlook for apartments are looking pretty good. With all of the millennials getting out of college having to work lower paying jobs, they are the ideal living arrangement for shelter. They are more affordable than houses, and so will be better suited for the lower income individuals and families. Also, the baby boomer population is getting older and will want to downsize and move into apartments as well where everything is taken care of for them as far as property maintenance. They are putting a lot of their things in storage facilities to make room for the smaller living space.
Overall the demand for apartments and affordable housing is on the rise because of the reasons mentioned above. It would be a wise idea and investment to start buying your share of multi family investments for the future so that you build wealth and have monthly spendable cash flow for your retirement. Or to just be more comfortable and financially free in the near future. You can’t go wrong with real estate, as long as you get a good price, or good terms!