With enough capital, multi-family buildings are good investment options. This type of housing is continuously gaining popularity for many reasons, begging the question if multi-family buildings are the future of housing?
But before we dive into that aspect of this article, it would interest you to know what multi-family housing is, as well as, the pros and cons of multi-family housing.
What is a Multi-Family Housing?
Multi-family housing as the name implies refers to a single building or housing unit that is built in such a way that it houses more than one family, albeit, living separately. Although multi-family housing houses more than one family, its looks suggest otherwise. Most multi-family buildings look like a duplex, an apartment building, condominiums or a townhome.
Because of the geographic constraints in areas like San Francisco and California. There is a huge propensity for multi-family homes.
What Are The Pros Of Multi-family Buildings?
The main advantage of multi-family housing is the availability of housing options, especially in cases of a housing shortage. This housing type sets up the “there-is-a-home-for-everyone” scenario.
There is always a vacancy in larger homes that can be exploited into multi-family homes that can accommodate small families. This is an advantage because this supports the creation of more homes in denser municipalities.
Investing in a multi-family building or utilizing your property for a multi-family building, comes with more rental income, not to mention the taxable revenue the property accrues. Please note that although rental properties are taxable, there may be situations where there is no visible net income for a rental property for tax purposes.
What Are The Cons Of Multi-family Buildings?
Now, let’s discuss the cons, everything with an advantage has a disadvantage too. At least that’s what my mom told me. And a multi-family building is not an exception.
The question here is, is turning my property into a multi-family home feasible? There are many ways this could go. It all depends on a lot of factors. Clearly, you need to plan well for this, like carrying out the necessary research on the permitting process to ensure that your potential building is legally affordable. This is because providing these homes is very capital intensive, and it’s, even more, when it involves converting a single home.
Not all neighborhoods are built for multi-family housing. Increasing the density of an area could prove very tasking and all the uncomfortable for some house owners. Not to mention the risk of over usage of public infrastructures, such as:
- The sewer
- Electrical systems
- Roadway systems etc. (there are roadway systems which design is for a single-family)
Developing multi-family homes in such areas would mean increasing the area’s density. In any case, it would involve restructuring the infrastructure to accommodate and support the new density.
However, a hiring professional or a structural engineer with knowledge of your locale, to verify local ordinances and municipal codes. Will help your choices.
Another very negligible point of developing multi-family housing is finding enough renters to fill the available spaces. You don’t want to have a development with empty units. You’ll end up compiling monthly costs with no rental income from the property.
However, setting your property’s pricing within the range of surrounding property prices, you’ll have an easier run at finding tenants.
Now Weigh the Pros and Cons
Are multi-family buildings the future of housing? We have seen the pros and cons of multi-family housing. What do you think? Everything we’ve discussed is from an investor’s point of view. Weighing the pros and cons can help you answer these questions.
The need for affordable housing, means potential income, making multi-family a good investment. Not to mention the increasing population every year.
Also, the downside associated with multi-family housing as discussed in this article is in a bid to give a high-level view of the multi-family housing investment. Downsides such as:
- Zoning restrictions
- Community character
Considering all the aspects in this article will help in embarking on a project of this magnitude. Going in without these considerations could prove costly.
It would interest you to know that there are many places crying for multi-family development. And developing this type of property is costly. But trust me, it is worth it if you consider the feasibility and projected income.