The Cons of Multi-Family Property Investment

Despite the many benefits of investing in multifamily property, there are also some drawbacks. A few of the cons are outlined below:

• Management Intensity Although property management can be outsourced, that doesn’t mean that multifamily isn’t management intensive. In fact, it’s quite the opposite. A multifamily property means dealing with many individual leases, different tenants who have various repair and maintenance requests, tenants who prefer to communicate in different ways, pay their bills differently, etc.

  When comparing management intensity of only residential property types, managing a multifamily property can be considerably easier than managing a disparate portfolio of single-family rentals. There are efficiencies that come with managing a single multifamily asset, including the ability to hire an on-site or live-in property manager, depending on the size of the property

• Cost Depending on where you’re looking to invest, multifamily property can be really expensive. In fact, this is one of the largest barriers to entry for most investors. Most banks will want to see the investor put down at least 20% as a down payment (if not more), which would mean at least $200,000 on a property that sells for $1 million.

  Coming up with that cash is no easy feat for the average investor, particularly in a bull market where many investors compete for the same multifamily property, thereby driving prices even higher. Single-family homes are often less expensive for those looking to buy residential rental property, but as noted above, single-family homes have their own management challenges to consider.

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