{"id":117025,"date":"2021-09-07T09:30:00","date_gmt":"2021-09-07T15:30:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=117025"},"modified":"2023-06-22T08:40:05","modified_gmt":"2023-06-22T14:40:05","slug":"multifamily-risk","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/multifamily-risk","title":{"rendered":"Know Your Risks Before You Grow: Here&#8217;s What to Expect in Multifamily"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC9191016062&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p>For the past several years, there has been talk of a potential recession for all kinds of reasons. But there\u2019s always a risk or a reason not to invest in real estate. Should that stop us from doing so? Simply put, no.<\/p>\n\n\n\n<p>It\u2019s indeed better to have no deal at all than to tie yourself up with a bad deal. But that doesn\u2019t mean there are no deals to be had. You just have to be patient and wait for the right ones.<\/p>\n\n\n\n<p>Yes, the competition is fierce, and the prices are expensive. This is why you need to be even more selective and pay more attention to the fundamentals when <a href=\"http:\/\/investing in multifamily real estate\" target=\"_blank\" rel=\"noreferrer noopener\">investing in multifamily real estate<\/a>. Unlike single-family properties, there are unique multifamily risks if you aren\u2019t paying attention to its specialized needs.<\/p>\n\n\n\n<p>There\u2019s no way to avoid risk completely. Due to all the variables that aren\u2019t in your control when it comes to investing in real estate, anything could go wrong at any time. But when it comes to multifamily investing, it\u2019s even more important to be aware of those risks and how to manage them effectively. To help prepare yourself, check out the most common types of risk below and ways to mitigate them.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">1. Asset risk<\/h2>\n\n\n\n<p>This kind of risk is about the value of an asset and its general risk in the market. All assets basically have this, and it\u2019s important to understand how high it is in terms of the property you\u2019re interested in <em>before<\/em> investing in real estate.<\/p>\n\n\n\n<p>Honestly, there\u2019s no way to get rid of this kind of risk completely. It\u2019s pretty much built into the world of investing. But to deal with as little of it as possible, it\u2019s best to learn everything you can about the asset. Make the most informed investment by being educated and making sure the risk is worth it. Ask yourself these questions to get started.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How much is the investment?<\/li>\n\n\n\n<li>Will I have to do renovations, and if so, how many?<\/li>\n\n\n\n<li>How much will those renovations cost?<\/li>\n\n\n\n<li>What kind of neighborhood am I planning to invest in, and where do I see it going in the future?<\/li>\n<\/ul>\n\n\n\n<p>That last bullet is very important. A bad market will ruin even a great investment property. But investing in real estate within the same asset class can help you manage the expectations of multiple places at once.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n  <div id=\"posts_lists-block_61250d14afe3f\" class=\"  my-10\">\n    <div class=\"\">\n      <!-- Column One -->\n      <div>\n                  <h2 class=\"mt-0 mb-1 js-toc-ignore\">\n            More on multifamily from BiggerPockets          <\/h2>  \n                  \n        \n        \n        <div class=\"grid grid-cols-1 gap-y-4 lg:gap-y-7 mt-5\">\n          \n<article \n\tid=\"post-129708\" \n\tclass=\"content-card mb-0 flex flex-col  post-129708 post type-post status-publish format-standard has-post-thumbnail hentry category-biggerpockets-daily category-real-estate-investing-for-beginners\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/scaling-single-family-multifamily\" target=\"\" aria-hidden=\"true\" tabindex=\"-1\" target=\"_blank\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"332\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/07\/Scaling-to-multifamily-560x380.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"10 Simple Steps to Scale from Single-Family to Multifamily\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/managing-scaling\/landlording\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">Landlording &amp; Property Management<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">12 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/214608.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2021-07-20T09:30:00-06:00\">Jul 20, 2021<\/time><time class=\"updated\" datetime=\"2023-03-28T05:21:50-06:00\">Mar 28, 2023<\/time><\/span><\/span>&nbsp;<a href='https:\/\/www.biggerpockets.com\/blog\/contributors\/paulmoore' class='no-underline line-clamp-1' target=\"_blank\">Paul Moore<svg class=\"h-5 inline ml-2\" viewBox=\"0 0 21 21\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><g clip-path=\"url(#a)\"><path d=\"M19.253 5.25a1.75 1.75 0 0 0-1.663 2.29l-1.42.902a2.188 2.188 0 0 1-2.868-.46L11.91 6.28a1.73 1.73 0 0 0 .342-1.03 1.75 1.75 0 1 0-3.5 0c0 .37.12.732.34 1.03L7.701 7.982a2.188 2.188 0 0 1-2.868.46l-1.42-.903a1.75 1.75 0 1 0-1.816 1.203l1.035 6.205a.438.438 0 0 0 .43.366H17.94a.437.437 0 0 0 .431-.366l1.035-6.204a1.75 1.75 0 0 0-.153-3.494Z\" fill=\"#FFC107\"\/><path d=\"M10.502 17.064c4.108 0 7.438-.98 7.438-2.188 0-1.208-3.33-2.188-7.438-2.188-4.109 0-7.439.98-7.439 2.188 0 1.208 3.33 2.188 7.439 2.188Z\" fill=\"#FFA000\"\/><path d=\"M10.502 17.501c-3.915 0-7.877-.901-7.877-2.625s3.962-2.625 7.877-2.625c3.914 0 7.876.9 7.876 2.625 0 1.724-3.962 2.625-7.876 2.625Zm0-4.375c-4.597 0-7.001 1.137-7.001 1.75s2.404 1.75 7 1.75c4.597 0 7.002-1.138 7.002-1.75 0-.613-2.405-1.75-7.001-1.75Z\" fill=\"#FFD54F\"\/><\/g><defs><clipPath id=\"a\"><path fill=\"#fff\" d=\"M0 0h21v21H0z\"\/><\/clipPath><\/defs><\/svg><\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/scaling-single-family-multifamily\" rel=\"bookmark\"  \n\t\t\t\t\tclass=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\t10 Simple Steps to Scale from Single-Family to Multifamily\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">It might seem complicated scaling from single- to multifamily, but it isn\u2019t. There are many benefits, and it doesn\u2019t hurt to at least try one deal. Once investors go through&hellip;<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"129708\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-129708 -->\n<article \n\tid=\"post-132668\" \n\tclass=\"content-card mb-0 flex flex-col  post-132668 post type-post status-publish format-standard has-post-thumbnail hentry category-deal-analysis\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/multifamily-deal-analysis\" target=\"\" aria-hidden=\"true\" tabindex=\"-1\" target=\"_blank\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"340\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/02\/multifamily-340x225.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"Multifamily Deal Analysis: How To Value A Multifamily Property\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/buying-selling\/deal-analysis\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">Finding Deals<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">7 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/72121.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2021-07-06T09:30:00-06:00\">Jul 06, 2021<\/time><time class=\"updated\" datetime=\"2023-06-22T08:32:20-06:00\">Jun 22, 2023<\/time><\/span><\/span>&nbsp;<a href='https:\/\/www.biggerpockets.com\/blog\/contributors\/chiagozie-fawole' class='no-underline line-clamp-1' target=\"_blank\">Chiagozie Fawole<\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/multifamily-deal-analysis\" rel=\"bookmark\"  \n\t\t\t\t\tclass=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\tMultifamily Deal Analysis: How To Value A Multifamily Property\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">If you can run numbers and keenly assess for multifamily cash flow and value-add opportunities, you can position yourself to help other investors who may not have the time or&hellip;<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"132668\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-132668 -->\n<article \n\tid=\"post-97714\" \n\tclass=\"content-card mb-0 flex flex-col  post-97714 post type-post status-publish format-standard has-post-thumbnail hentry category-multifamily-real-estate-investing category-biggerpockets-daily\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"\" aria-hidden=\"true\" tabindex=\"-1\" target=\"_blank\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"332\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/03\/multifamily-properties-560x380.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"How &amp; Where to Find Multifamily Properties For Sale\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/asset-classes\/multifamily-real-estate-investing\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">Multifamily Real Estate Investing<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">7 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/05\/cropped-janephoto-150x150.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2021-05-27T09:30:00-06:00\">May 27, 2021<\/time><time class=\"updated\" datetime=\"2024-02-27T14:42:55-07:00\">Feb 27, 2024<\/time><\/span><\/span>&nbsp;<a href='https:\/\/www.biggerpockets.com\/blog\/contributors\/jane-meggitt' class='no-underline line-clamp-1' target=\"_blank\">Jane Meggitt<\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" rel=\"bookmark\"  \n\t\t\t\t\tclass=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\tHow &amp; Where to Find Multifamily Properties For Sale\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">Ready to invest in multifamily? Get creative\u2014dig up your own deals by driving your market and using the internet.<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"97714\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-97714 -->        <\/div>\n      <\/div>\n    <\/div>\n  <\/div>\n\n  \n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">2. Manager risk<\/h2>\n\n\n\n<p>A property will be less likely to perform well if it isn\u2019t managed well. Whether you manage the property directly or hire someone to do it for you, if the job isn\u2019t done properly, you\u2019ll most likely see a decline in the investment\u2019s revenue.<\/p>\n\n\n\n<p>To help mitigate this risk, save some money. A healthy cash flow is important in keeping your investors happy. A multifamily property typically generates a 6% cap, which is the net operating income divided by the initial purchase price.<\/p>\n\n\n\n<p>You may not have this 6% minimum cash flow in the beginning, depending on where you buy, but you should get very close to this number after some renovation. By the way, renovations also cost money.<\/p>\n\n\n\n<p>In terms of upkeep, you also have to be on top of repairs needed for the home. These can become very expensive very fast if you aren\u2019t quick to act on them. Having about $10,000 on the side just in case anything happens while you have tenants is a great idea. But getting everything fixed up before you put your place on the market is also a smart move.<\/p>\n\n\n\n<p>Letting your property develop all kinds of issues will make it less valuable to people looking to move in, and if they do, they may not be likely to stay.<\/p>\n\n\n\n<p>Never rely on cash flow to finance your renovation cost. Doing this will restrain your capital and slow down the value-add progress. It\u2019s also risky if the cost turns out to be higher than budgeted.<\/p>\n\n\n\n<p>In addition, you should never budget only just enough money for renovation. Raise an additional 10% to 15% of the predetermined budget because construction is full of surprises. Things like multifamily loans can be an option, but those kinds of lenders can be pretty serious about paying back the money on time. If you won\u2019t be able to make a payment for any reason, it\u2019s likely that you won\u2019t get assistance from the lender.<\/p>\n\n\n\n<p>But this doesn\u2019t mean you should avoid renovations altogether. In fact, that\u2019s what will give you the edge when it comes to competition in the marketplace. The right kinds of changes will attract tons of potential residents to you. This, on top of expected rent growth, means that you can charge even more per tenant over time.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">3. Overleverage risk<\/h2>\n\n\n\n<p>This kind of risk is all about being in too much debt compared to your property\u2019s value and cash flow. Basically, if a piece of real estate is in such bad shape that it isn\u2019t worth fixing up, your overleverage risk is really high.<\/p>\n\n\n\n<p>Sometimes, having this risk isn\u2019t a bad thing because people can see the potential in projects. And if you\u2019re planning on flipping the property, you can save a lot of money by living in one unit while fixing it and renting out the vacancies as they become ready for tenants.<\/p>\n\n\n\n<p>To avoid this one, be sure to go into your investments with a plan. Have a set budget for how much you\u2019re willing to spend on a property and then how much you\u2019re open to spending on renovations. So many landlords love a good project and fixer-upper, but if your money is not managed effectively, the multifamily risk here would be too high and turn the home into a money pit.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Build your wealth with multifamily houses<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Learn how to become a millionaire by investing in multifamily houses! In this two-volume set, <em><a class=\"rank-math-link\" href=\"https:\/\/store.biggerpockets.com\/products\/the-multifamily-millionaire-volume-i?utm_source=blog&amp;utm_medium=blog%20banner\" target=\"_blank\">The Multifamily Millionaire<\/a><\/em>, Brandon Turner and Brian Murray inspire and educate you into becoming a millionaire.  <\/p>\n\n\n\n<div id=button-custom-event-block_64134fe56b103 class='button-custom-event'>\n      <a\n    href=\"https:\/\/store.biggerpockets.com\/products\/the-multifamily-millionaire-volume-i?utm_source=blog&#038;utm_medium=marketing_block\"\n        x-on:click=\"window.analytics.track('Blog Block | Publishing: MFMV1 Book', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/multifamily-risk',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Get Your Copy<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/06\/mfm1-scaled.webp\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">4. Economic and local market changes<\/h2>\n\n\n\n<p>As investors, we all know that market conditions never stay the same for long. That\u2019s why it\u2019s so important to research the area you\u2019re investing in beforehand.<\/p>\n\n\n\n<p>Think about which industries are most likely to get hit the hardest during the next downturn, and avoid cities that rely heavily on those types of industries. Part of that multifamily risk is that you\u2019ll have multiple families living on your property. If every one of them works in the same field and that industry goes down tomorrow, you\u2019re out of luck.<\/p>\n\n\n\n<p>Cities with great employment diversity are much more resilient economically than a city that is heavily reliant on just one industry or one company. You\u2019ll be able to draw many different kinds of people to your multifamily property, which could lessen the need to continuously be on the lookout for tenants.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">5. Difficulties with financing<\/h2>\n\n\n\n<p>Getting started in real estate can be difficult, but it can be even more so with multifamily housing. For example, many states, like New York, require investors to put down three to four times as much money in a down payment on a multifamily compared to a single-family property. Getting a loan or investors can be more difficult too.<\/p>\n\n\n\n<p>To combat this, you have to save up even more money to cover the cost of the down payment, renovations, marketing, and more. At least $100,000 for a property with three or more units should be enough to get you started, but also remember that with multifamily housing, a lot can go wrong at once. The responsibility to take care of all of that is on you. If you don\u2019t have the money to manage all of this upfront, it will be easy to fall into debt you can\u2019t get out of.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">No reward without risk<\/h2>\n\n\n\n<p>Even though we are discussing avoiding risk as much as possible, that doesn\u2019t mean the risk isn\u2019t worth it. Making the right kinds of choices with the right kind of risk could ultimately mean a great outcome for you.<\/p>\n\n\n\n<p>At the end of the day, any real estate investment is a gamble because we never know what the future holds. Adding the extra concerns with multifamily risk only makes things that much more stressful. But being educated about all of these topics can make it as easy as possible to get involved and help you make the best possible choices, so it\u2019s more and more likely you\u2019ll be able to cash out.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Any real estate investment is a gamble. Adding the extra concerns with multifamily risk only makes things that much more stressful. But being educated about all of these topics makes it more likely you\u2019ll be able to cash out.<\/p>\n","protected":false},"author":286556,"featured_media":139935,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5524,7119],"tags":[],"class_list":["post-117025","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-investing-for-beginners","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/117025","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/286556"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=117025"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/117025\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/139935"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=117025"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=117025"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=117025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}