.png?width=234&height=80&name=logo-white-1%20(2).png "RCN Capital"){kind=logo}
The investment landscape today is very different than what most investors are used to. Higher interest rates contending with higher property values make it harder for investors to find those easy wins in flips and single family rentals. Instead, investors are turning to multifamily investments to fill out their portfolios, owing to a number of reasons. In the current real estate market, the stable income and growth potential of multifamily properties make it a very wise move. Have you been considering a multifamily property for your next investment? Here’s a few reasons why investors have been flocking to this real estate asset class.
Demographic Shifts and Lifestyle Preferences
Multifamily investments make sense in today’s market landscape because of the shifting demands of the people looking for homes. As the younger generations reach typical homebuying age, they have proven to drive demand for rent as opposed to owning homes. Multifamily properties are often located closer to metropolitan centers, which provides convenience through amenities and easy access to transportation, sometimes even with walkable communities. The appeal of a home in such an area is that it allows people to maintain a life without requiring them to own a car. It also means that the closer a property is to areas of interest and the more amenities it provides will have a direct impact on rental demand.
Superior Returns Compared to Single-Family Properties
One of the more apparent benefits of multifamily properties is they provide more than one source of rental income each month. This helps make them more profitable, and multifamily investments generally have better cap rates than single family homes. As the owner and operator, you can also benefit from economies of scale when supplying and maintaining the units. And if a unit ever becomes vacant, you still have other units to help cover the loss of income. You can even take this time to make upgrades to the vacant unit, increasing its value and overall profitability.
Purchasing a multifamily property can serve as a quick way to diversify an investment portfolio, as these properties often do not correlate with other investments and are more resistant to negative effects like inflation. Spreading risk across multiple units makes them inherently safer investments, and they may continue to grow in value during market downturns.
Professional Property Management Opportunities
Another huge advantage of investing in multifamily property is the different management options it provides. You don’t necessarily need to handle the day-to-day management of the units by yourself. Property management companies can take care of tenant screening, rent collection, and maintenance for you, effectively turning your investment into passive income. Hiring property management becomes more cost effective the more units your own, so you will need to compare the cost of such a service to your net income to see if it makes financial sense.
Financing Options and Accessibility
Multifamily properties provide a unique benefit in that they can be easier to finance when compared to single family homes. Although they often require higher loan amounts, multifamily properties also provide additional income which makes them more affordable for owners. This means that while a single family property may not currently be a good investment for you, a multifamily one may be less of a financial burden. Generally speaking, a lender will want to conduct more due diligence with a multifamily property, as they are higher value loans and they will want to ensure accuracy. Although this does extend the loan application timeline, it does not make qualifying for a loan any more difficult.
Long-Term Investment Potential
Multifamily properties make for a very wise move because they offer many wealth building benefits in the long-term. We mentioned how these investments are not correlated with the greater market, which makes them more resistant to market downturns. These homes also provide a great cash-on-cash return, and these funds can be put towards making improvements to further increase your returns. The appreciation potential of multifamily properties, combined with their exceptional monthly income, make for a great long-term investment.
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?