Profitable Lessons from Multi-Unit Properties

A real estate developer I know said something interesting to me last week.

“Virtually all the foreclosed properties out there are single-family homes or condos,” he said. “If you can find me more than a handful of foreclosed multi-unit properties, I’ll eat my shirt. It’s because people almost always make money in multi-units, so they don't go into foreclosure.”
An interesting statement, for sure. So I started searching online for statistics about multi-family foreclosures. What percentage of all currently foreclosed properties are multi-units? I had no luck finding out.

But then I went to a popular online foreclosure listing service, Foreclosurewarehouse.com. Sure enough, I found multi-unit properties listed there, but not many. Against single-family homes and condos, maybe two percent of all the foreclosed properties listed were multi-units.
I then talked with some successful developers about why so few multi-units go into foreclosure.

Let me share a few of their insights:

Reason one: Buyers of multi-unit purchases really analyze the numbers. Before buying, they analyze the rent roll, carefully weigh taxes and other expenses to make sure their investment properties will be profitable. Many purchasers of owner-occupied single-family homes don’t do that. They buy blind, hoping their income will be sufficient to pay the monthly cost. And sadly, they sometimes fail.

Reason two: Multi-units provide multiple income streams. If you own one, you can raise rents, repurpose properties as retail space or luxury units and take other steps to wring more income from properties. So an astute investor who buys a multi-unit property can create lots of new opportunities to make money.

Reason three: Buyers are lined up for profitable multi-unit properties. If you are lucky enough to own one and need to sell it - perhaps to raise money for an even bigger investment - you will probably not need to wait long for a buyer to appear.

When you add up those reasons why multi-families rarely go into foreclosure, it becomes pretty clear that it is a good idea to invest in multi-unit properties.

Multi-units might just be the best income-producing, foreclosure-resistant investments that are out there today.