Should you buy a multi-family property that needs work? This guide outlines the pros and cons of doing so.

Pros and Cons of Buying a Fixer-Upper Multifamily Property

Buying a fixer-upper is a big responsibility – especially if it’s a multifamily property. Here’s what you need to know so you can make the right choice. In the meantime, you may also want to talk to a Silicon Valley REALTOR® about your options; you may be surprised at how easy it is to find these types of properties.

Pros of Buying a Fixer-Upper Multifamily Property

  • Fixer-uppers can be cheaper than turnkey properties
  • You can choose to invest in the areas of the property that matter most to you
  • You can earn more in passive income with a multifamily property

Pro #1: Fixer-Uppers Can Be Cheaper Than Turnkey Properties

The most obvious pro of buying a fixer-upper is that they tend to be cheaper than turnkey properties. This is especially true if you’re able to find a foreclosure or short sale. Keep in mind, however, that the repairs will need to be made before you can start renting out the units. This means that you’ll need to have the finances in place to cover both the purchase price and the repair costs.

Related: 3 easy ways to find undervalued properties

Pro #2: You Can Choose to Invest in the Areas of the Property That Matter Most to You

Another advantage of fixer-uppers is that you can choose to invest in the areas of the property that matter most to you. For example, if you’re focused on creating energy-efficient units, you can invest in solar panels and other green upgrades. Or, if you want to attract high-end tenants, you can focus on luxury finishes.

Pro #3: You Can Earn More in Passive Income With a Multifamily Property

While all investment properties have the potential to generate passive income, multifamily properties have a leg up in this department. That’s because you’re able to rent out multiple units, which means more potential income. In addition, multifamily properties often have on-site amenities that tenants are willing to pay extra for, such as a gym or swimming pool.

Related: 5 benefits of purchasing a multifamily investment property

Cons of Buying a Fixer-Upper Multifamily Property

  • Fixer-uppers can be a lot of work
  • You may not be able to immediately start generating income from the property
  • The repair costs can quickly add up

Con #1: Fixer-Uppers Can Be a Lot of Work

One of the biggest disadvantages of buying a fixer-upper is that they can be a lot of work. Not only do you have to coordinate the repairs, but you also have to manage the tenants and make sure that everything is up to code. If you’re not prepared for the extra work, it’s best to steer clear of fixer-uppers.

Related: 3 types of real estate deals to avoid if you have low risk tolerance

Con #2: You May Not Be Able to Immediately Start Generating Income From the Property

Another downside of fixer-uppers is that you may not be able to immediately start generating income from the property. This is because, in most cases, the repairs will need to be made before you can start renting out the units. So, if you’re looking for a quick return on investment, a fixer-upper may not be the best option.

Con #3: The Repair Costs Can Quickly Add Up

Finally, it’s important to keep in mind that the repair costs can quickly add up. Even if you’re handy and able to do some of the work yourself, there are still costs associated with materials and labor. In some cases, the repairs can end up costing more than the purchase price of the property. So, be sure to factor in the repair costs when considering a fixer-upper.

Related: Should you buy a distressed property?

Are You Buying or Selling a Duplex, Triplex or Fourplex in Silicon Valley?

If you’re selling a duplex, triplex or fourplex in Campbell, Cambrian Park, Los Gatos, San Jose, Santa Clara, Saratoga, Willow Glen or another community in Silicon Valley, we’re here to help. Call today or fill out the form below to find out about our innovative marketing plans that can put your investment property in front of all the right buyers.

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