25 Jul What Are the Multifamily Investment Risks? Part 2
Are you planning on investing in multifamily rental properties? If so, you’re not alone. Multifamily properties are one of the best real estate investments in the United States but as with any investment, they do come with risks.
In part two of our series on multifamily investment risks, we’re going to discuss more of the risks that can potentially come with investing in this type of real estate so you know what to expect when you purchase your first multifamily investment property.
Competition from Other Multifamily Rental Properties
Besides having to deal with a changing economy, and the possibility of another dip in the real estate market, one very important risk that investors could face when investing in multifamily rental properties includes competition from other investors.
Competition is to be expected in any venture, especially in multifamily rental properties because rents often dictate how an owner is able to do financially in a rental market.
Rental rates have become especially important in California in recent years and it’s not uncommon for a renter to be willing to drive a few extra miles if they can save a few hundred dollars per year on rent.
Lawsuits from Tenants
Another potential risk to be aware of when you invest in multifamily investment properties is the risk of being sued by your tenants.
Sadly, in today’s world, many tenants are “savvy” when it comes to using the legal system to their advantage and it’s not been uncommon for some tenants to sue landlords for discrimination if the landlord raised the rent.
The best thing you can do after investing in a multifamily investment property is to hire a property manager like MW Real Estate Group to manage your property for you.
With a property manager managing your multifamily property you can have complete confidence in knowing that your investment property is being managed in accordance with the law and your best interests as a landlord will be represented.
Natural Disasters
There’s no doubt that the climate is changing and we’ve seen more natural disasters over the last 10 years including earthquakes in Southern California, fires, and flooding.
As a real estate investor, you have to be prepared for anything, including damage from acts of nature, because it’s entirely possible that your multifamily investment property could be damaged during a natural disaster which also could result in uninsured losses, reduction in cash flow, or other adverse financial consequences.
Before you invest in a multifamily property make sure you’re aware of where the property is located and confirm if it’s in a location that’s prone to fires, flooding, or earthquakes because you want peace of mind in knowing that your investment will not be affected should a natural disaster strike.
Once you have all of the historical data about where the property is located you should carefully consider if you’re going to invest in that property or continue on looking for another multifamily rental property.
Financing Risks
Last of all, another important risk to consider before you invest in a multifamily property is the financing risks that you could face especially if you buy a property with a mortgage loan that has a high-interest rate.
Even though you may be able to afford your mortgage payment now, if we have another economic downturn like 2008, or you lose some tenants, you could face not being able to make your monthly mortgage payments and with insufficient cashflow, you might default on your loan.
Minimize Multifamily Risks by Hiring A Property Management Company
As we stated earlier in the article, property management is literally the “key to success” with owning rental properties because we can help you to avoid most of the risks that come with owning multifamily while saving you the time, money and hassle of managing your property yourself.
MW Real Estate Group is the best property management company in Los Angeles. Investors in Los Angeles and around the world turn to us for sourcing, acquiring, and managing investment properties in the Los Angeles area.
To learn more about the services that we can offer you contact us today by calling (213) 927-2117 or connect with us online by clicking here.