In Part 1 on the economics of owning and managing small multifamily units, we discussed the advantages and disadvantages of adding multifamily properties to your investment portfolio.
On the whole, we believe this type of rental property generally adds value in terms of ROI and is a smart choice, provided that it ticks all the other boxes you would want it to check (e.g., has a good location, potential to attract quality tenants, etc.).
In this post, we’ll discuss the management aspect of multifamily properties relative to single family rental units, as well as the pros and cons that come with this type of property.
Advantages of Managing Small Multifamily Properties
Relative to managing single family units, multifamily properties offer several advantages for those interested in property management, including:
- The ability to grow quickly – a multifamily unit allows you to go from managing one single family unit to 5 or more units in a single contract.
- They may offer more sophisticated clients – owners who hire you have an appreciation for and understanding of what it takes to successfully manage rental properties.
- You are able to manage more units per client, which means there is less overhead.
- There may be higher tenant turnover and thus more income sourced from leasing fees.
Disadvantages of Managing Small Multifamily Properties
Some of the above advantages may also be considered a disadvantage depending on the circumstances. Here are a few challenges you may face managing small multifamily units versus single family properties:
- There is client concentration risk. If one client walks away, you are suddenly out of managing 5 or more units.
- You may face higher tenant turnover (could be a pro and a con)
- You may be expected to conduct budgets and reports for the property owner.
- There may be asset management expectations. Read this post to understand the difference between asset management and property management.
- You will be responsible for dealing with tenant issues, such as noise and parking complaints, maintenance requests, and a host of other less glamorous aspects of property management.
- You will be responsible for managing the property’s common areas, ensuring landscaping and snow removal needs are promptly addressed, and keeping the overall unit safe and functioning.
While multifamily properties do have similarities to single family rental units, there are challenges and expectations that come when scaling your management responsibilities.
To learn more about what you can expect when adding multifamilies to your ownership or management portfolio, get in touch with us at RL Property Management. We’re happy to share some of what we’ve learned as we’ve scaled our business to include management of more than 600 units in the greater Columbus area.