Multifamily housing is the most affordable of all the options available for investment when building your real estate portfolio, as well as offering some of the best benefits. Because there’s a high and continuous demand for rental property, multifamily units tend to have fewer vacancies, so even if you have relatively less disposable income, it is a preferred option.
With a wide range of investment properties, investing in apartment buildings offers many advantages. Let’s take a look at the benefits of investing in multifamily properties
Increased Cash Flow Generation
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It is a fact that people prefer to rent instead of buying property, which means that occupancy rates for multifamily properties are at an all-time high. This is especially true for those properties in strategic locations.
Thanks to the increased demand, the average monthly revenue will be higher compared to any other type of real estate investment. By investing in various multifamily properties in markets that are experiencing explosive growth, you will have the advantage of multiple, steady income sources generated from this type of investment.
The acquisition is very affordable
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When you calculate your investment on a per-unit basis, it will be far cheaper to acquire multifamily units than other types of real estate properties. This makes it cost-efficient and ownership comes with minimal risk.
Even when applying for mortgage loans, the interest burden for this type of investment tends to be less. Financial institutions prefer to finance such property since the default rate is lower on apartment buildings compared to single-family units. With interest rates being lower, the operating costs for this type of investment are cheaper.
Multifamily investments are easier to manage
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Think about it: it is easier to manage a couple of apartments in one building as opposed to managing them if they are scattered around the city. This practicality would even justify employing a property manager to avoid facing daily management hassles.
Typically, large multifamily properties are managed by an investment group, like syndications, which usually hire or serve as a property manager. The owner has to pay them a management fee and they will take care of your apartment units as a part of the entire multifamily community.
You get unique tax benefits
The government gives tax breaks as an incentive to invest since multifamily units help to ease housing in cities. There are various tax breaks offered depending on the classification of the property, which increase your revenue on investment.
Higher appreciation rate & reduced investment risks
One of the main advantages of investing in multifamily units, and in real estate as a whole, is that the value of the asset increases with time, and what’s more, the rate of appreciation tends to be higher than any other type of investment. By maintaining your property well, you can get a higher rental value and it also helps attract more renters.
Even though investing in multifamily properties comes with a certain degree of risk (as with all types of real estate investments), these types of assets carry the lowest risk.
One of the main risks is the vacancy rate of the units that you own. The chances of all tenants leaving at the same time are low, so you will be generating at least some income from your investment.
As long as you have done your due diligence and made a strategic investment choice, your assets will continue to appreciate over time.
It’s a great way to build your portfolio
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If real estate investment is one of your main vehicles of savings, you can increase the size of your portfolio faster than with any other type of investment. It is easier to acquire one property with multiple units compared to multiple single-family properties.
Also, since they are easier to manage, the cost of ownership is less, and the revenue stream will be relatively steady. Even if there are adverse market conditions, the risk of default is less, and it will not set back your investment plans.
The bottom line
Though all real estate investments carry their benefits and risks, multifamily assets continue to be the investment of choice for beginners and seasoned investors. Once you do your due diligence and decide on which property to invest in, you can expect your investment to grow over time and keep generating a steady stream of revenue.