Multiunit properties are generally the least risky form of real estate investing given that a single vacancy does not generally cause a substantial issue for satisfying underlying financial obligations. This is especially true for properties that have ten or more units. It should be noted that the package offered on the website includes a plan specific for the acquisition of a moderate scale multiunit property (in addition to two other business plans specific for ongoing real estate investment as well as property rehabilitation). This article will showcase the strengths, weaknesses, opportunities, and threats faced by real estate investors that focus their acquisitions on multiunit property buildings.
Strengths
As discussed above, these types of properties are generally able to generate substantial rent rolls in any economic climate as the rental fees associated with multiunit properties are substantially lower than single-family and duplex styled properties. The ongoing risks related to managing these properties are lower given that the rent roll is not centralized on one specific tenant.
Given the economic security of these properties, banks and financial institutions are always happy to provide acquisition loans as well as refinancing credit facilities. The terms of these loans are preferable.
Weaknesses
These properties often have slightly higher default rates given that they cater to the needs of lower and lower-middle income earning people. During difficult economic conditions, rent generation can be difficult as unemployment rates increase. As such, many owners of these types of properties should have substantial cash on hand to deal with these potential issues.
It should be noted that these properties also face competition from similar facilities in any market. In order to keep occupancy high, many owners of these properties will often offer amenities such as free internet. This can contribute to a higher operating cost.
Opportunities
Quite simply, the method of expansion is to acquire additional properties. Many real estate entrepreneurs will hypothecate their initial property in order to finance additional acquisitions. As discussed earlier, the acquisition of additional rounds of capital to acquire new properties is a straightforward process for real estate.
Threats
As with most real estate ventures, the biggest threat that these companies face are negative changes in the economy. Major deleterious changes can impact rent rolls as well as the underlying financing costs (which is a limited risk at this time as interest rates have dropped substantially over the past four months).