Property flipping has become a major area of focus within the real estate market, especially with the popularity of mainstream media and entertainment. TV shows like “Fixer Upper” and “Property Brothers” take viewers through the process of single-family home renovations and property flipping. However, the world of the “fix-and-flip” isn’t limited to only single-family home reno’s, and many real estate investors are turning toward multi-unit apartment properties as the demand continues to increase.
The single-family home market tends to be much more competitive than the multi-unit market. Single-family home flippers are competing with other property investors and regular home buyers looking for a residence. As a multi-unit investor, your only likely competition is other investors. It’s also important to consider that many multi-unit apartment owners like to keep the sale of their property more private, so properties are often sold off-market, further decreasing the level of competition. So, looking for a good apartment flip may take a little more time if you look off-market, but it will ultimately limit the competition of other investors and potentially save you money.
Steady Cash Flow
When you’re investing in and flipping a multi-unit property, checking market rents for the surrounding local area is crucial. By checking market rent, you’ll have a better idea of what your potential for a rent increase is. A small increase in monthly rent charges can make a significant impact on the value of your investment and your ability to flip the property. When all is said and done, you’ll have a steady cash flow from multiple units.
If you eventually decide to sell your multi-unit flip, you’re selling a property that holds a much higher value than a single-family home. As rent prices increase, so does the value of your flip, making for a much larger return on your investment. Consider the financial breakdown of owning a multi-unit apartment property:
Single-family and multi-unit properties are valued very differently. While single-family homes are evaluated on a comparable basis (comparing the price of other single-family homes within the surrounding area), multi-unit apartments are valued on a “cap rate” basis. The cap-rate takes the properties Net Operating Income (NOI) and divides it by the purchase price of the property. So, when it comes down to it, flipping the property and implementing a small rent increase will boost the properties NOI, leading to a rise in value.