Diversify Your Portfolio with Multifamily Real Estate

Have you been looking to get into the world of real estate investing, but you aren’t quite sure where to start? Rental properties have been a staple in investment portfolios due to their consistent monthly income and potential for long-term gains through appreciation. But what often gets overlooked are the advantages of investing in multifamily real estate. Multifamily properties provide even more benefits than single-family investments and their income potential only scales with how many units are included in the property. Continue reading as we explore the basics of multifamily real estate along with how they can help you diversify to build a stronger investment portfolio.

Multifamily Property Basics

Multifamily homes are classified as any property with two or more separate living units included. From an investment standpoint, they allow you to acquire multiple cash flowing assets in one transaction. This benefit can be a huge boost to the property’s monthly income, but it also means managing multiple rental units. However, managing a multifamily home is generally easier than taking care of the same number of single family properties. It will still be beneficial to understand all the aspects of the rental process. If you don’t have any experience as a landlord, it may be wise to start with managing a single family property before moving on to a larger multifamily investment.

Benefits of Investing in Multifamily Properties

Let’s go over some of the unique benefits multifamily real estate investments provide:

• Higher cash flow potential: Multiple rental units means more cash flow, and multifamily homes generally have better cap rates than single-family rental investments.
• Economies of scale: You can benefit from monthly costs being spread across multiple rental units. This applies to both management and operational costs, as well as making upgrades and renovations to the overall property.
• Lower vacancy risks: Vacancies are inevitable, but with a multifamily property, you have multiple income streams to help cover the loss of income when it does occur.
• Appreciation potential: Multifamily homes are very desirable investments because of their various financial benefits. This means they tend to appreciate in value better than most other real estate classes, and they are more resilient to market downturns.

How Multifamily Properties Diversify Your Portfolio

The other major benefit of investing in multifamily homes is how they help diversify your portfolio, leading to more reliable growth over time. The advantages we covered such as having multiple streams of income make them safer investments than most other types of real estate. Branching out into different asset classes is also a good way to spread risk in your portfolio, so consider adding a multifamily investment if you haven’t done so already. And by spreading out your investments across multiple geographical areas, you can build an even stronger portfolio that is resistant to market downturns.

3 Steps to Get Started with Multifamily Investing

Here are the 3 most important steps to take if you plan to get started with multifamily investing:

• Research and Education: The first thing you need to do is get up to speed with multifamily investing. Familiarize yourself with the real estate investment process, along with property management, and the landlord-tenant laws for the area you’re looking to invest in.
• Financing: Before you start scoping out properties, you need to have reliable financing in place for your investment. Qualifying for a multifamily loan can be more difficult than with a single family home. Take some time to compare various loan options so you can find the right financing for your project.
• Finding the Right Property: You should also dedicate enough time to due diligence when searching for a property. Location is a crucial factor in the success of your investment, and so is the quality of the neighborhood surrounding your property, along with what amenities it can provide to residents.

Additionally, you will need to decide if you’re going to manage the property yourself or hire a third-party management company. Hiring a property manager is always an option, and it leaves you with more time to focus on other investments, but you’ll need to compare the cost of such services to your bottom line to determine if it’s financially viable.

Mitigating Risks

We also want to provide some tips for how you can mitigate risk and ensure you will have a successful investment. Managing your property means taking proper care of tenants, which is easier if you have a well-developed system in place. Keeping in regular contact with your tenants will show that you’re striving to provide a quality environment, and you should make an effort to address any issues that are brought up quickly.

When the time comes to fill a vacancy, you will want to create a thorough screening process. This usually includes a background check, credit check, and reaching out to the tenant’s previous landlords if possible. Finally, consider purchasing landlord insurance with liability coverage which can pay for the cost of repairs caused by less careful tenants.

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 perform renovations on your investment property?