Walnut Street Finance Blog

Should You Transition from Single to Multi-Family Real Estate Investing?

Posted by Walnut Street Finance Team on Jul 31, 2018 2:38:09 PM

Single-family properties are exactly where beginners to real estate investment should start. You’ll get a great idea of how to scout for properties, how much those properties should cost, how intensive the renovations will be and how much you’ll be able to sell the property for when you’re done. They’re perfect for people looking to cut their teeth in a new financial endeavor.


Once you’ve started to truly understand the single-family property market, it might be time to broaden your capabilities to include multi-family real estate investing. When done correctly, you can increase your income dramatically.

What’s the Difference between Single and Multi-Family Real Estate Investing?

The main difference between investing in single-family properties and multi-family properties is the endgame. With a single-family property, you identify a home that can be picked up inexpensively, easily renovated, and then resold for a relatively quick return on your investment.

Multi-family properties, on the other hand, are longer-term investments. They aren’t one-and-done deals — they are a way to generate continuous income, over and over again. All you have to do is ensure the units inside are attractive to renters, and the rent paid will earn you a profit — even after the cost of the mortgage — month after month after month.

Why Should I Make the Switch to Multi-Family Investing?

There are a lot of reasons why multi-family investing is making more and more sense these days. A major reason lies with our older generation. Seventy-five million Baby Boomers are on their way to retirement. As they do, a sizable portion will seek out living space that is less costly than a mortgage and easier to maintain, and an apartment building may be just what they’re looking for.

There’s also our younger generation to consider. When it comes to Millennials, the idea of home ownership isn’t nearly as important to them as it was for previous generations. They’re often quite comfortable renting a nice apartment in lieu purchasing a home. They’re free to enjoy other things in life without the worry of making their own renovations and repairs, not to mention the lack of yard work that comes with renting.

Essentially, there is a large influx of renters on the market, making it much easier to keep vacancy rates low in multi-family properties. And the more units you fill, the more income you generate. It’s truly a win-win scenario for everyone involved.

Real Estate Investment Professionals Are Making the Switch

Grant Cardone, real estate investment mogul and host of The Cardone Show, gave up on single-family investments a while ago. “Not only does a house leave you less mobile, it ties up your money so you can’t use it for real assets,” Cardone asserts. He sees multi-family property investments as a way to seriously leverage your money and grow your wealth.

Cardone currently owns more than 4,000 apartments, and he’s not stopping anytime soon. He scans online for apartment buildings and complexes where the projected monthly income from the investment will be significantly more than the monthly mortgage payment. The way he sees it, multi-family properties can essentially pay for themselves while still making a profit, and once the mortgage is paid off, the buildings generate even more income.

The Wealthy Are Looking to Multi-Family Investments

Due to the unpredictable nature of the stock market in the last several years, many of the country’s richest people have moved to real estate investments to maintain and grow their wealth, and they’re discovered the dependable allure of multi-family properties.

They’ve found that it’s an easy investment strategy to get into, there are a lot of tax breaks to be had (you barely pay any, in fact), and their tenants are paying their debt for them.

It’s Not Difficult, but it Requires Research

When you’re investing in a single-family property, you need to do a bit of homework to make sure the home is likely to be sold for a profit. A bit more effort needs to go toward the purchase of a multi-family property.

There are a lot more numbers to be considered when investing in multi-family properties. To determine the potential for profit, you’ll first need to thoroughly research the mortgage you’ll receive, have a down payment ready, estimate your rental income, determine the price-to-income ratio, determine the price-to-rent ratio, understand the gross rental yield, and figure out the capitalization rate. Necessary improvements to the building to attract renters also factors in, with many successful multi-family investors relying on hard money to get a new property up to par.

Once you have a solid understanding of all of these numbers, you’ll have a much better idea of whether the multi-family property you’re interested in is truly worth the investment.

The Move is Worth It

When you think you’re ready, multi-family real estate investment is a great way to generate some serious revenue. Make sure you fully understand the costs of the building you’re interested in purchasing, make sure it’s attractive to potential tenants to keep your vacancies low, and you’ll soon have an investment property that continues to pay for itself. In fact, the profits it generates can quickly be turned into the down payment for your next multi-family property. The decision is yours to make, but it could be a lucrative idea to make the switch from single-family investing to multi-family real investing.

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Topics: Real Estate Investing Tips

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