A multi-family real estate property can be a fantastic way to gain experience and grow your portfolio in real estate. On top of having reliable income, these properties are known for their high demand and profitability. Intrigued? Here are 6 reasons to invest in multi-family real estate property.
6 Reasons to Invest in Multi-Family Real Estate
Easier to Finance
Many investors find that it is easier to get financing when investing in multi-family real estate due to its lucrative nature. Your lender will be assessing your application based on the total return your property generates before signing off on the final loan. Since multi-family properties tend to earn higher income than single-family rentals, you’re more likely to obtain financing for a multi-family property. Think about it- when a tenant leaves a single-family rental property, the landlord is short on income until they can find another tenant. A multi-family property offers flexibility when tenants leave due to them having multiple income streams, minimizing your overall risk in the market.
Growing a Portfolio Takes Less Time
With multi-family properties, growing a real estate portfolio will take less time as these properties are perfect for investors who wish to build a large portfolio of rental units. Investing in a property that has your desired number of units rather than buying properties flat out saves you time and money. Why pay for 10 different inspections if you want to rent out 10 separate units? In some cases, this route would also require an investor to take out 10 different loans for the properties; all this headache could be avoided by purchasing one property with multiple units.
Property Management is More Affordable
Managing multiple properties will oftentimes lead an investor to hire a property manager to handle day-to-day operations at their rentals. Although property managers are convenient, investors find these costs add up and quickly hurt their cash flow. However, when managing a multi-family rental property, investors tend to generate enough monthly income to afford a property manager and still make generous profits. On the other hand, investors who own only one or two single family properties do not have the luxury of hiring external support and instead are responsible for all maintenance, rent collection, and tenant screening procedures.
Reliable Cash Flow
Investing in multi-family properties has the advantage of continuously producing reliable cash flow, considering you have many units you are renting instead of just one. Even if one unit becomes vacant, you can still count on the consistent cash flow from the other tenants. By having multiple streams of income, you can offset your risk in the real estate market by always having cash flow you can count on from other tenants. Many multi-family rental properties have lower advertising costs as well, considering these properties are always in high demand.
Higher Potential for Appreciation
Did you know multi-family properties have higher potential for appreciation? This factor is to not be overlooked, as appreciation is a key factor when determining the potential returns on a property. Many investors make the most of their multi-family properties by keeping it well maintained and adding fruitful amenities. Keeping your property up-to-date and well maintained will allow you to raise rental rates and fill vacancies quickly. Any investor knows it takes money to make money, and the same holds true in real estate. Doesn’t it make sense to invest a relatively small amount to improve your property and increase your appreciation potential? Setting a high standard across your property can secure cash flow, translating to equity when it’s time to sell.
Demand is High
Many investors prefer multi-family properties due to their high demand, and that growth is not stopping anytime soon. There’s always going to be tenants looking for multi-family rental units, whether that be someone planning to retire or a child leaving the nest, many tenants prefer the smaller space and affordability of multi-family units. Rental properties offer appeal in many areas such as updated amenities, higher-quality conditions, and added convenience, making it an always in-demand dwelling for tenants in various locations.
RCN Capital offers short-term and long-term financing options for real estate investors. Whether you are looking to fix & flip properties or hold properties for rental income, RCN has flexible options that are suited to your needs. Connect with us today to discuss your next real estate investment.