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Posted about 6 years ago

​4 Reasons Multifamily Real Estate Investment Fail

There has been so much talk about multifamily real estate that it has become a megatrend online. Checking statistics, you will find that there are about 5 million online searches globally about multifamily homes (data from combined terms, multifamily + apartments + flats, etc.) What could be the precursor for such trend?

Today, renting is much more practical than owning. This is very obvious in this “millennial” generation. That is why multifamily homes became the hottest in terms of real estate investments.

This has led to many investors seeking success in the multifamily industry. If you watch the trend closely, prices are even driven to ridiculous levels which makes it kind of difficult to understand how owners will make money out of it. Because of aggressive market evaluations, it is important to look at some reasons why an investor may fail the multifamily megatrend.

Being a multifamily investment advocate, I still think that multifamily investment is the best and least risky. However, in this post I am sharing, I would like to cite the top reasons why it can lead to failure.

The 4 Big Reasons of Failure in Multifamily:

1. Bad Property Management

I have seen clients in and out of the multifamily investment and noticed that the biggest reason they fail is because of bad property management.

Enforcing leases (and due dates) and getting quality tenants must be the utmost priority of a multifamily facility. Maintenance issues and security comes in next. Poor management will not attract quality tenants, without quality tenants, it is impossible to improve the property.

2. Bad Market / Terrible Asset

Most of the people within my network must have heard that I blast information of hot multifamily investment deals. However, I seldom announce every deal that is brought to me.


Some properties are just bad. I only wish to talk of properties worth the investment money.

Due diligence is required when picking the right property. Investigate on as much data from neighborhood to rent history of the building before taking any further step in buying it.

Typically, people who fail multifamily investing picks a bad market with a terrible asset. Poor quality tenants within a high crime rate neighborhood is a perfect example.

But that isn’t all you need to fail multifamily investing. The biggest mistake would be to choose a property that does not meet the demands of local market.

3. Improper Underwriting

There are plenty of multifamily properties out there that are within a great market and are actually superbly managed, and yet losing. Here’s why:

If you purchased the property through a loan and you overpaid for the property price then just consider how you are going to pay for it? A minor market downturn can easily hurt your investment.

Do not over-leverage your properties if you want to grow wealth through multifamily investing.

4. Undercapitalizing

The property must always have enough capital to move around for use in repairs and maintenance or simply if something goes wrong. If you have no available funds to take care of It due to not collecting enough rent, then the property will easily decay, lose value and not attract quality tenants. Setting aside enough money to cover for the “unexpected” is a must.

Given these four reasons to fail multifamily investing, it still remains to be the best vehicle towards successful real estate investing.