When you’re deciding to invest in Littleton, Colorado, you need to decide what types of properties you’d like to add to your real estate portfolio.
Typically, you’ll need to choose residential or commercial.
If you choose to be a residential real estate investor, you’ll need to decide whether that means single-family homes or multifamily properties.
Investing in multifamily properties makes sense for investors who want a solid portfolio of properties with low risk.
A diverse investment portfolio is always a good idea, and maybe you currently own some single-family rental homes but you’d like to broaden your reach and buy some multifamily units or buildings.
Here’s why it’s a good idea:
Multifamily properties in this market help you reduce your vacancy risk.
Multifamily properties are also more cost-effective when it comes to maintenance and management.
There are some excellent reasons to invest in Littleton multifamily properties, and we’re sharing some insight into why these make excellent investments.
Reduced your Vacancy Risk with Littleton Multifamily Properties
The rental market in Littleton is strong, and we don’t see any reason that this will change. There’s a low vacancy and high occupancy rate, thanks to high sales prices keeping people in rental homes for longer. We also have a growing population of people who need high quality rental homes. You’re not likely to worry too much about vacancy.
But, markets change, and protecting yourself against unexpected vacancy costs is always a good idea. Luckily, investing in multifamily properties in Littleton will protect you against the risk and the expense of vacancy.
When you rent out a single-family home, you lose that income as soon as your tenant moves out. There are turnover costs to cover and maintenance to attend to, and all the while you’re paying for the utilities, the landscaping, and ultimately the marketing and advertising costs that will find you a new tenant. You’re paying for all those things without having any rent coming in.
When you rent out units in a multifamily property, however, you have multiple income streams coming from the same property. If you have a six-unit building and one tenant moves out, that vacancy will hurt. But it won’t completely interrupt your cash flow. You still have rent checks from your five other tenants, which will cover you during the turnover period.
It’s better risk management.
Acquisition Costs and Multifamily Homes
Typically, a multifamily building will cost more than one single-family home. You’re getting a more valuable property.
When you do the math, however, you’ll find that there’s a lower per-unit acquisition cost. You’re paying more, but you’re receiving several units, which increases your potential cash flow and long term ROI.
Perhaps you’ll want to buy a couple of condos or a single unit in a building. That will reduce your acquisition costs, too, and you may pay less than you’d pay for a single-family home.
You’ll have different options when it comes to how you finance your property as well. Many of the experienced investors we work with leverage the property type in order to attract better lending deals.
As a multifamily investor, you can likely find lenders who are willing to offer better rates on loans for multifamily properties. They understand the potential rental income that’s earned off a multifamily property. They understand that the risk of default and foreclosure drops dramatically.
Lower Per-Unit Costs with Maintenance and Management
When you have an apartment building with multiple units, getting maintenance work done on those properties is a lot easier, cheaper, and faster than it would be to dispatch maintenance teams to five or 10 separate single-family homes around the city of Littleton.
Multifamily properties make more financial sense, especially when it comes to preventative issues like pest control, roofing, HVAC servicing, and plumbing. Your vendors will appreciate the volume of work you’re giving them, and they’ll give you lower rate per unit.
It’s the same for property management. Most of the Littleton property managers you talk to will charge loss for those units in multifamily buildings than they’ll charge to manage your single-family homes individually.
Increased Portfolio Value and Size
When you’re growing your Littleton real estate investment portfolio, investing in a multifamily property will move you closer to your goals than a single-family home. You’re able to bring in a handful of properties rather than just one.
This gives your entire portfolio some diversity as well as extra value.
As rents continue to rise and your multifamily properties continue to grow in value, you’ll find you can leverage what you own in order to reach your investment goals.
What to Expect when You Invest in Multifamily Littleton Homes
To effectively invest in a successful multifamily property, you’ll need to:
Choose a property in the right location. This matters to tenants who rent an apartment or a duplex just as much as it matters to a tenant renting a single-family home.
Look for a building that’s well-maintained and in good condition. You don’t want to spend a lot of money on capital improvements right away.
Evaluate tenant retention rates. How long to tenants stay, on average, in that building?
Choosing the right multifamily property to invest in is your first step. Then, you’ll have to understand that renting out a home like this is a bit different. Tenant disputes are more likely. Lease enforcement becomes more detail-oriented. You’ll have to manage common areas and landscaping contractors.
We understand the Littleton market extremely well, and we believe there’s a lot of money to be made when you’re willing to invest in multifamily properties. Whether you’re investing for the first time or looking to diversify your portfolio, make sure you’re surrounding yourself with experts. You’ll need a good broker and a lender. You’ll need a Littleton property manager who can advise you on what the rental values are likely to be, and whether any expensive repairs will be needed before you’re able to get your vacant units ready for the rental market.
We’re happy to help. Please contact us at Assured Management, Lakewood property management experts serving residential landlords in West Denver and the surrounding areas, including Littleton, Golden, Wheat Ridge, Arvada, and more.