6 Reasons Why Savvy Investors Choose Multifamily Properties

Investing in real estate comes with its fair share of challenges, especially in today’s competitive, low inventory market environment. There is a need for investors to make smarter decisions and diversify their portfolios if they want to ensure consistent long-term growth. That’s why more and more investors have decided to expand into multifamily properties, as they can quickly become a solid foundation for portfolio returns. Their inherent income potential along with the many benefits they provide make multifamily homes a smart addition to any portfolio. Let’s cover a few key reasons why savvy investors have been choosing to invest in multifamily properties.

#1: Higher Cash Flow Potential

The simplest reason you would want to invest in a multifamily property over a single family is that you can acquire multiple streams of cash flow in one purchase. This also means multifamily properties have great cap rates when compared to single family homes, allowing you to recover your initial investment in less time. Having multiple sources of monthly income means you are less affected by vacancies, as you still have other rental units generating income from the same property. You can even make upgrades to vacant units to improve the property’s cash flow while still being covered by your other rental units.

#2: Economies of Scale

Another great benefit of multifamily properties is that you can save on operating costs due to economies of scale. The cost of many of the things you’ll need to buy to maintain your rental property are spread across the many rental units in it. Along with that, whenever you make repairs to get rid of an issue, the benefit affects your entire property. When you contrast this with managing multiple single-family rentals spread across different locations, you can save both time and money by investing in a multifamily home instead.

#3: A Diversified Income Stream

Multifamily properties make for one of the strongest ways to diversify your investment portfolio, especially if you approach them with due diligence. Let’s say you’re the type of investor who typically flips properties. Adding a multifamily rental to your portfolio allows you to have a consistent source of income that doesn’t require as much work as a home flip, and the proceeds from your investment can help fund future projects. And even if you already own rental properties, investing in a multifamily property can help you diversify your portfolio and help it become more resistant to market downturns. Try investing in a different markets & locations from your other properties to limit your exposure in any given area.

#4: Long-Term Appreciation Potential

One of the best things about investing in real estate is how properties tend to appreciate over time. Rental properties do this while also providing you with consistent cash flow. This inherent ability to generate returns keeps rental properties in high demand, and as a result they are one of the strongest appreciating asset classes. Although multifamily properties come with higher entry costs than single-family homes, they make up for it with additional cash flow. When combined with healthy appreciation over time, multifamily properties can provide great returns to investors.

#5: Access to Better Financing Options

Did you know it can be easier to qualify for financing with a multifamily property than a single-family home? Due to their strong income potential, lenders view multifamily homes as safe investments with very consistent returns. A multifamily home with a healthy cap rate can easily qualify for financing from most lenders. Generally, lenders will be more concerned with making sure you have experience managing rental properties. Be sure to compare multiple financing options to find the best fit for your investment, along with options from private and hard-money lenders.

#6: Demand and Demographics

There are also good reasons why now is a smart time to invest in multifamily homes. Demographic trends show that more people are moving to urban areas, and choosing to rent instead of owning property as a result. Younger generations have also proven to prefer renting property more than any previous generation. This leads to growing demand for rental housing, and especially multifamily properties, which you can benefit from by getting in now.

RCN Capital

The easiest way to save on rental property financing is to find a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Are you looking to purchase or refinance an investment property?