You Should Be Recommending Multifamily Investments to Your Clients – Here’s Why

Multifamily properties are some of the most rewarding investments on the market, and both investors and their lending partners stand to gain by branching out into this asset class. Multifamily homes provide unmatched stability, strong returns, and better scaling for investors, not to mention the tax advantages and appreciation potential that make them a smart addition to any portfolio. Brokers who specialize in multifamily investments can also benefit from higher commissions and strong client relationships.

Are you a broker or lending partner that’s considering expanding into the multifamily market? Here’s why you should add multifamily products to your offerings, and some key points for getting the conversation started with your clients.

Stronger and More Stable Cash Flow

Let’s start by discussing why multifamily homes stand out from other real estate asset classes. For starters, having multiple income streams from one asset is a great advantage. These properties are typically easier to maintain than owning multiple single-family investments. And there is less risk of losing income from vacancies, as there are still other units providing income in the meantime. This stability can be a huge selling point when you talk to clients about the benefits of multifamily property, and it’s worth highlighting.

Additionally, rental demand has increased as rising prices and elevated interest rates have pushed many would-be homebuyers to continue renting. That means less vacancies, more favorable terms, and a better ROI for investors.

Scalable Portfolio Growth

The other major advantage of investing in multifamily property is the unrivaled scalability it can provide for a portfolio. Acquiring multiple rental units in a single purchase is great for establishing cash flow in an investment portfolio. Multiple sources of income also means that these properties have better cap rates than single-family homes. This allows owners to generate equity and recoup their initial investment faster, and this better positions them for further acquisitions.

Multifamily properties are an efficient path to building wealth, and you can pitch them to your clients as a smarter way to scale a portfolio quickly.

Favorable Financing Options for Investors

There is a common misconception that it’s more difficult to secure a loan for a multifamily property, but often the opposite is true. As mentioned, multifamily investments often have better cash flow and cap rates than single family properties. This means that they are viewed as very stable investments, and owners are able to fulfill debt obligations more easily.

This becomes especially useful when working with private lenders who operate in the real estate space. They are typically more focused on the property’s cash flow and debt-service coverage ratio (DSCR) than a borrower’s personal finances when determining loan approval. This is great for your clients who might have less than perfect credit, or who receive their income from non W-2 sources.

Long-Term Appreciation and Equity Potential

Due to the high demand for rental properties and the stability of multifamily homes, this asset class shows strong appreciation when compared to other investments. The appreciation can be combined with value-add opportunities such as unit renovations or external upgrades to further improve a property’s value.

The other great benefit this provides investors with is equity. Multifamily properties build equity quickly as the mortgage gets paid off and the property increases in value. This equity can then be pulled out of the investment and used to fund new acquisitions, accelerating portfolio growth.

Tax Advantages for Investors

There are also some great tax advantages to be had from owning rental properties. Many of the expenses associated with the business, including mortgage interest, insurance, and property management costs can be deducted. As a broker, although you can’t give tax advice, you can still utilize your expertise to steer clients to better decisions. For instance, you can suggest a cost segregation study to help investors reduce taxable income with depreciation. You can also take this as an opportunity to refer clients to an accountant or similar tax professional from your own personal network.

RCN Capital

To help your clients maximize the returns on their next investment, 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 financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.