On Flip or Flop, you usually see us dealing with single-family flip houses, but you’ve definitely seen us take on houses that had mother-in-law suites, too. While these aren’t really your traditional apartment or condo buildings, I love properties that have the ability to bring in income for our buyers. Basically, when buyers see that they have a small rental property on their property, they see a way to pay their mortgage or make some money on the side without doing much extra work at all. I was thinking about these kinds of properties the other day and how small multi-family buildings could be really great ideas for real estate investing projects.
Basically, if you find a duplex, triplex, or small apartment building, you aren’t looking at a huge investment, especially if it’s a foreclosure or a short sale. And these flips give you a lot of really great options when it comes time to sell.
You Have a Built-In Exit Strategy
First of all, if the building doesn’t sell quickly once you’ve rehabbed it, you have an automatically built-in exit strategy. All you need to do to start making money on a building like this is to hire a property management company and start renting out your units. You won’t have a mortgage to pay on it, so you’ll basically just be recouping your losses immediately, and you’ll start to make money on it while you keep it on the market.
Plus, having tenants and a property management company in place is a great selling point when you’re attracting buyers. They literally won’t have to do anything but buy the property, and they’ll immediately start getting cash flow.
The Market Is Right for Rentals
Plus, while you don’t necessarily want to be a landlord, and you probably aren’t that interested in a fix-and-hold property, there are plenty of investors out there who are. The housing crash back in ’08 is still affecting a lot of people, and a lot of people who would’ve been in the market to buy houses a few years ago are now looking to rent instead. So, with a higher demand for rental properties, fix-and-hold investors are looking for small, multi-family buildings to invest in.
Market Your Building to Investors and Homeowners Too
Basically, when Tarek and I sell a house that has a mother-in-law suite or a carriage house that can be rented out, we open up our market a lot. We get buyers who want more space, and we get buyers who want to turn their homes into investments.
And you can do the same thing with a duplex or triplex. You’ll be marketing to investors who want to rent out all of the units in the building, and you’ll be marketing to homeowners who want to live in the building while renting out the other units.
Don’t Forget to Do Your Research
Of course, whether or not your flip is going to be successful depends a lot on the market. Are there already a lot of buildings like yours in the area? Are a lot of them vacant and rundown? Is the area growing, and do you see other investors putting work into similar buildings?
Answer the same questions you’d ask yourself for a single-family flip house, and look at the potential for other real estate investing opportunities in the area. If investors are interested in holding properties where you’re buying your building, you’ve probably found a pretty great deal. Multi-family buildings do tend to cost more than single-family houses, so you’ll need to make sure that you have your finances in order and that you know what you can expect to get out of it when you sell. With all of that information in place, you should have a really good idea of what kind of risk you’re taking and whether or not you should go with it. Multi-family buildings can be really lucrative under the right circumstances.