Top Six Benefits of Multifamily Property Real Estate Investments
Have you been thinking about investing in real estate? Then, probably you’ve come across the debate of whether to invest in multifamily homes or single-family homes. The choice of your real estate investment niche should be dependent on your investor identity and the profitability of the investment. The multifamily real estate is well-known for providing affordable housing and often the preferred housing for many people. Before purchasing any property as an investor, have a clear plan for what to do with the investment. While choosing between multifamily and single-family investments can be challenging, you can agree that each investment has pros and cons. This article is to persuade you to join multifamily investments by giving the reasons that make it a superior investment.
Below are the benefits of multifamily investments over single-family homes.
Economy of scale
Are you an out of town investor? There’s no better way to achieve an economy of scale than owning a multifamily complex. Having a multifamily house allows you to have low per-unit expenses because all the units are in a specific location. You can employ managers for your properties to service the units more cost-efficiently since the units are in the same location. Buying multifamily properties is a great way to build your portfolio and scale up quickly.
Less Work to Buy a Multifamily Property
Though rarely taken into account, it takes less time and expresses to acquire a multifamily property than the equivalent single-family homes. For instance, it will take you less time and expenses to buy a 30-unit complex compared to buying 30 single-family homes. In multifamily, you only have to visit one home, negotiate with a single owner, agree and close a deal with the single owner. This will give you more time to focus on growing your business and reduce expenses.
Forced Appreciation
In real estate investing, counting on appreciation is not a priority. However, multifamily properties give the investor a greater upward potential. While the market competition drives the value of properties in single family homes, multifamily properties are valued using the income approach. This gives you the control to “force” the appreciation of your multifamily properties by raising the net operating income (NOI). You’re not pinned to the market forces to change the value of the properties.
Spreading Risk over More Units
Multifamily properties give allow you to reduce risks by having multiple tenants pay for the expenses. Imagine having a single-family property and it goes vacant for three months. You will be paying the mortgage for a property that is not generating income. However, if your 8-unit complex loses two tenants, the rent from the other six will be able to cover the expenses. You will be able to pay for the expenses and still have stable cash flow each month.
Less Competition in Multifamily Properties
If you have been avoiding multifamily properties, you’re not alone. Most investors focus on other niches such as wholesaling and flipping. They hold to a belief that buying an apartment buildings complex is more challenging. Therefore theirs is less competition in multifamily properties.
Tax Incentives
Most cities love properties that are made to house multiple tenants because it accommodates more people without asking for increased land development. Owning multifamily properties will open you up to different tax incentives that you won’t get when investing in another real estate.