Ready to diversify your investment portfolio? Investing in real estate can be an exciting opportunity; adding properties to your portfolio is a great way to reduce risk, generate more cash, and grow your wealth. Since you are looking for a fantastic investment opportunity, a multifamily real estate will be the perfect fit for you! Here’s why.
What Is A Multifamily Home?
A multifamily property is a residential property that has more than one housing unit. Apartment complexes, duplexes, triplexes, condominiums and townhouses are all common examples of multifamily homes. Often considered a great wealth-building tool, multifamily properties can be excellent additions to your investment portfolio.
Pros Of Multifamily Property Investing
Cash Flow
One of the benefits of investing in multifamily homes is the cash flow they generate. Since such properties have multiple residents paying rent, if one or two units remain vacant, you’ll still be getting rent from the other units. Also, vacant units can be re-leased to ensure stable cash flow year in, year out.
Tax Benefits
There are several tax benefits when you invest in a multifamily real estate. Following are some of the many deductions you can make:
- Mortgage interest
- Maintenance and operation costs
- Property management fees
- Repairs and renovations expenses
- Marketing costs
Also, even if a multifamily property has appreciated in value, it can be depreciated over a 27.5-year period. That’s a win-win situation if you ask us!
Scalability
Investing in multifamily real estate helps investors gain the ability to scale their portfolio quickly and easily. It’s much harder to scale your investment portfolio when investing in properties such as single-family rentals or shops or hotels or strip malls.
Passive Income
Multifamily real estate is a great way to generate passive income. You won’t even have to lift a finger! And if you are new to the whole real-estate investing landscape, you can just hire property management experts who can take care of the property and its residents for you.
Easy To Finance
Because of their guaranteed cash flow, banks don’t find multifamily properties too risky. The chances of a foreclosure on an apartment complex are not high, especially when compared to single-family rentals. These factors can result in lending institutions providing a more competitive interest rate to you.
Owner-Occupied Real Estate Investment
Owner-occupied real estate investment is an investment where you can buy a multifamily property, reside in one unit, and rent out the other units. Collecting money for paying the mortgage never looked this easy!
Cons Of Multifamily Property Investing
More Expensive
The cost to buy a multifamily home will be significantly higher than the cost to acquire a single-family home. For example, a single-family home could cost you as little as $65,000 in a city like San Diego. In the same city, the cost of a multifamily home can cost you anywhere between 500,000 to 10 million.
Competitive Market
Because of the several benefits associated with multifamily real estate, more serious and experienced investors scoop up multifamily properties for sale within days! Some of these investors even buy in cash and are often willing to waive off purchase contingencies, all for making the deal more appealing to sellers.
Higher Maintenance Costs
Due to their nature and structure, multifamily properties incur higher maintenance costs and new investors should be ready for potentially large repairs and renovations costs.
Tougher To Manage
Managing multiple rental units can become overwhelming. Not only is it a huge responsibility, but it also is time consuming. This is where property management organizations like BFPM can help.
With Beach Front Property Management experts by your side, you can be assured of the fact that your investments are in good hands. From maintaining your multifamily homes, responding to resident concerns and resolving their issues, to helping you market vacant units, we’ll be with you every step of the way. For further information on our services, please book a quick 15-minute consultation call.
Trevor Henson
Trevor Henson is an experienced entrepreneur (10+ highly-successful start-ups) and property investor with a demonstrated history of building and leading teams in investment property management environments, maximizing returns for property owners, and optimizing properties through construction management and re-positioning. He…Learn more about how we can help. Customized solutions for large portfolios!