10 Reasons Why Investing in Multi-Family Real Estate Is Worth Every Penny

10 Reasons Why Investing in Multi-Family Real Estate Is Worth Every Penny

Did you know that rental units in the US enjoy an 87.9% occupancy rate?

This is enough to get anyone thinking about investing in real estate. At least with real estate, you’re better positioned to get a positive return on investment. That’s a benefit you can’t get from any other investment today.

But, how do you know the best real estate to buy? Odds are, you’ve already heard of single and multi-family real estate, but you are on the fence about the two.

If so, you’ve come to the right place. We’ll be looking at why multi-family properties like apartments are the best investments.

Let’s get started!

1. More Affordable Acquisition

Sure, a single unit is cheaper than a multi-family property. After all, a multi-family unit houses more homes and requires more resources.

But, you’ll realize that apartments are cheaper when you analyze them from a per-unit basis. You can get estimates for both property types and compare them to confirm this.

If capital is an issue, look for lenders or pool funds with other investors. You may spend more in the short term, but these properties’ benefits will be worthwhile in the long run.

2. Easy to Finance

Did you know it’s easier to get financing for apartments than single units? Unfortunately, many investors miss out on multi-family properties because they don’t know this.

Banks consider apartment buildings to be less risky than other options. That’s because there’s a guaranteed constant income stream for loan repayment.

This is still the case even when the property isn’t at full tenant occupancy. After all, a twenty-unit building with five vacancies is only 25% unoccupied.

The same can’t be said for single units. They become 100% unoccupied every time a tenant moves out, leaving lenders with no cash flow. So, don’t be afraid to approach your lender, thinking they’ll not finance you.

3. Increased Cash Flow

This is one of the top reasons to invest in multi-family real estate. You’ll get more money from a ten-unit property than a single unit. These properties are in high demand, so you rarely have to worry about vacancies.

However, this isn’t to say that all properties are free from this risk. You’ll need to plan and do thorough research to identify optimal properties.

The best units are located in busy areas, with easy access to basic amenities. Invest in such units, and watch as you become the next Donald Bren.

4. Long-Term Appreciation

Real estate, in general, is one of the highest appreciating investments. The value of apartments has appreciated by 147% since 2010, showing the industry’s potential. So, you can rest assured that you’ll never go wrong when you invest in apartment buildings.

Of course, we can’t generalize and assure you that all properties appreciate. It takes a lot of work for your property’s value to increase.

You’ll need to maintain it, upgrade equipment, and market it to attract tenants. This way, you can negotiate better prices when you decide to sell.

5. Lower Investment Risk

Like other investments, apartment buildings aren’t free of risk. After all, you can only earn from your property when you have tenants. Nonetheless, they carry a lower risk than other properties.

You can always count on a few tenants, even in the worst market conditions. And you can reduce vacancy risk by finding a good location and marketing your properties.

You can also control occupancy by giving your tenants the best living conditions. Even in the worst-case scenario, you can always count on price appreciation.

6. Easy to Manage

You’ll find managing a single apartment building easier than many single units. You can collectively deal with tenants’ problems since they’re under one roof.

You’ll also find multi-family properties cheaper to manage than other options. That’s because you won’t have to incur travel costs moving from one tenant to the next.

7. Property Management Is Viable

Multi-family real estate investing is also attractive because it allows you to delegate. It doesn’t make financial sense to hire a single-unit property manager. Management costs would cripple you because single-family units are a small portfolio.

But, the income generated by multi-family properties gives you room to get some help. Property managers here only charge a fraction of your income to handle tasks.

You don’t have to conduct tenant screenings, maintain your property or collect rent. You only have to sit and let your investment work for you as you reap the benefits.

8. Tax Breaks

Looking at multi-family real estate for sale also makes sense from a tax perspective. The government gives real estate investors various tax incentives for providing housing. For instance, you can enjoy mortgage interest deductions when filing your taxes.

Remember, deductions translate to increased revenue flowing into your pockets. Hire an experienced finance manager to help you take full advantage of tax breaks.

9. They’re Physical Assets

Multi-family properties differ from other investments like stocks because they’re hard assets. They can be touched and seen, so they’re easier to sell than other options.

There’s also a sense of pride that comes with owning a physical asset. You can’t get that from paper assets like bonds and stocks.

10. Allow You to Build Your Portfolio Quicker

There’s no better way to start investing than through multi-family properties. After all, buying a 10-unit property is easier than buying ten single units.

You won’t need to travel, spend or do as much research as with single properties. And, you get to avoid the hassle of dealing with multiple lenders. You only need one lender to finance all your units.

Multi-Family Real Estate Is the Way to Go

It’s normal to be skeptical about investing in multi-family real estate. After all, these properties need a lot of capital and constant maintenance.
But they’re worthwhile. They’re more affordable when assessed from a per-unit point of view.

And they’re also easier to finance, manage, and generate a constant flow of income. These are only a few of the benefits you stand to enjoy from investing in apartment buildings. Don’t miss out on them.

For more insightful articles on a range of topics, be sure to check out more of our blog.