How Multifamily Investments Can Maximize Your Client’s Portfolio

Multifamily properties are a great addition to any serious real estate investor’s portfolio. They provide owners with many strategic benefits, not just for diversification purposes, but also through strong returns and tax advantages. Additionally, they put investors in a good position to further continue growing their portfolios through refinancing opportunities. As a broker or lending partner, understanding the key benefits of this asset class helps you make clients more comfortable with branching out into multifamily investing. It also helps you maximize their effectiveness in a client’s portfolio.

Read on as we cover some of the greatest advantages of multifamily rental properties and how lending partners can utilize them to help their clients find success in real estate investing.

Key Takeaways:

• Strong Investment Benefits: Multifamily properties offer diversification, steady cash flow, and resilience during economic uncertainty.
• Tax & Financing Advantages: Owners can leverage deductions, depreciation, and often secure favorable loan terms like DSCR loans.
• Rapid Equity Growth: Appreciation, stable rents, and value-add improvements accelerate equity building and refinancing opportunities.
• Portfolio Risk Reduction: High demand for housing ensures consistent occupancy and long-term stability.
• Key Metrics to Monitor: Cap rate, occupancy rate, local market trends, population growth, and job data guide smart acquisitions.

Why Multifamily Investments Stand Out

Let’s start with some of the key differences between multifamily properties and your standard single-family rental investment. Of course, a multifamily home allows an investor to acquire multiple cash-flowing rental units at once, which can be easier than managing multiple investments in different locations. These properties tend to make very stable investments, maintaining their value or even continuing to grow in times of economic uncertainty. Their stability is due to consistent cash flow from rents that tend to keep up with economic trends. As a result, multifamilies stand out as one of the best hedges against inflation.

Portfolio Diversification Benefits

Multifamily investments help reduce risk in a portfolio, mainly through their ability to provide steady returns from both income and appreciation. As mentioned, these properties tend to hold their value well in market fluctuations. That’s because people will always need a place to live, and therefore multifamily homes are constantly in demand. To maximize their diversification potential, you can suggest that clients purchase a multifamily home in a different market from the one they are currently exposed to. The more spread out their investments can be, in both type and location, the more resilient their portfolio will be to economic downturns.

Tax Advantages and Financing Opportunities

There are several financial benefits to investing in multifamily property. Many of the costs associated with running a rental business can be deducted from mortgage interest to maintenance and repairs. Property owners can also utilize cost segregation to depreciate the value of all the assets on a property over their usable lifespan, including the building itself. You should recommend that your clients work with a tax professional to maximize their tax savings with a multifamily investment.

It’s a little-known fact that securing financing for a multifamily property can be easier than with a single-family investment. Due to their inherent stability and strong cash flow, lenders view them as very safe investments, and this allows borrowers to secure more favorable terms. DSCR loans stand out in particular, since approval is based on a property’s net operating income rather than the borrower’s financial profile.

Equity Building and Refinancing Potential

Another great benefit to owning multifamily properties is how quickly they build equity. They benefit from strong appreciation, as well as stable rents which can be used to pay off a mortgage over time. In high-demand markets, where rents increase and property values rise quickly, your clients can build equity at an incredibly fast rate. Property owners can accelerate this through value-add strategies like making renovations or offering more amenities, significantly boosting their investment’s value.

Once equity has grown, it becomes a powerful tool that can be used to fund new acquisitions to a portfolio or be reinvested to make property improvements and boost cash flow further.

Key Metrics to Watch

To help clients make smarter investment decisions, you need to understand the multifamily market so you can guide their acquisition strategy. That means you will need to get familiar with the key metrics that allow you to identify potentially lucrative investments. Certain markets will be more profitable for multifamily investing than others, and you can take a look at population numbers and job growth to determine if the data supports an investment. For specific properties, cap rate, average occupancy rate, and the direction home prices are headed in the area will tell you how stable returns will be in the coming years. Be sure to take a look at local trends as well, such as the quality of schools and infrastructure developments to determine if tenants are more likely to stay at the property for longer.

Helping clients make the most of a multifamily investment lies in conducting due diligence, choosing good properties to acquire, and making use of effective strategies to maximize returns. As a lending partner, be sure to conduct regular check-ins with your clients to ensure their multifamily investments are in a good state to position them for further growth with their portfolios.

RCN Capital

In order to maximize the returns on your clients’ investments, partner with a lender that can provide you with 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 and lending partners. If you are looking to offer rental property financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.