How You Can Diversify Your Real Estate Investment Portfolio with Multi-Family Properties - Article Banner

A diverse real estate portfolio provides you with less risk and more opportunities for growth. If you’re thinking about how to diversify your own portfolio and you’ve mostly invested in single-family homes, you should consider those multi-family properties that you may have shied away from in the past. 

Here’s what to look for and how to do it.

Why Invest in Idaho Falls Multi-Family Properties?

There are several benefits to diversifying your portfolio with the acquisition of multi-family homes. 

  • Multi-family investment properties can protect you against the risk of vacancy better than single-family homes. It comes down to the number of tenants and units that are providing income. When the lease ends and your tenant moves out of a single-family home, you have no rent coming in at all. When one tenant moves out of a duplex, however, you still have the other tenant paying. If you own a four-unit property or an apartment building, there are multiple streams of rental income and you won’t be left with no rent at all.
  • There’s an economy of scale that you can only reach with multi-family investments. For example, when you need to have your HVAC units serviced or your roof inspected, you’re covering several different properties with a single service call. This will keep your expenses lower than if you were sending the same vendors all over the city to look at various single-family homes in different locations. Professional property management fees are likely to be lower as well and all of your per-unit expenses will be more manageable.
  • Multi-family investments provide value for owners and tenants. This is another great reason to diversify with multi-family rentals. You’ll get more for your money. That’s more rental income, more space, and more flexibility. You’ll also have a solid pool of tenants. Rents are rising, and a lot of well-qualified renters are finding themselves priced out of the single-family home rental market. Those are the tenants you’ll attract to your well-maintained multi-family property.

Finding the Right Property for Your Portfolio

Property LocationThis won’t come as a surprise: Location is important when you’re buying. 

Look for a location that will have the most appeal for renters. That means good schools, easy access to shopping, restaurants, and entertainment, and amenities like parking and outdoor space. A great location attracts high-quality tenants who are willing to pay top rents.

You’ll also want a property that’s in generally good condition. Spending a lot of time on renovations and upgrades will only create a longer vacancy period. If the property is already occupied by tenants, be sure to take a look at their lease agreements and evaluate the rents they’re paying to ensure they’re at market levels. 

Finally, decide what multi-family means to you. Are you thinking of a condo unit in an HOA community? Maybe you want a duplex or a small apartment building. Talk to a broker who can help you make sense of the market, and make sure you bring in some property management expertise so you know what your rental values are likely to be.

When you take a look at your real estate investment portfolio and see the same types of properties, it’s time to diversify. If you have existing assets, consider a 1031 exchange when you’re ready to invest in multi-family units. 

Investing in a multi-family property is a great way to grow your real estate portfolio and bring in additional rent. If you’re ready to talk about finding the right property, contact us at Jacob Grant Property Management.