Cash Flow One of the biggest benefits of investing in multifamily real estate is the promise of reliable monthly cash flow from rental income. While single-family homes have only one tenant or group of tenants, multifamily properties have several renters paying rent. There are many advantages to owning multifamily real estate. These include access to better and easier financing opportunities, the ability to quickly grow the rental property portfolio, and the luxury of hiring a property manager.
Multifamily investment differs greatly from investing in a single family or in condominiums. The obvious advantage is that it allows you to generate multiple revenue streams while generating a constant appreciation of value. Instead of buying a single unit that you can rent, you'll buy an entire house or apartment building. You can choose to live in one of the units and use your income stream from rental units to reduce or even eliminate your housing costs.
While all investments carry the risk of loss, multifamily investments, on average, are better. With a single-family home, all your proverbial eggs are in one basket. If that fails, you could lose significantly. Multifamily investments are not without problems, but they do not have the same volatility in terms of income.
Either way, this type of property can accommodate multiple occupants, either as individuals or families. If you are a multi-family investor, you have the opportunity to force the appreciation of a property to increase the income of the asset through operational efficiencies, renovations, and marketing strategies to increase the value of the property. A multifamily property will generally consist of owning the property and land in a registered deed. When based on a per-unit basis, the cost of building a multifamily property is more affordable than other types of real estate.
Properties that have only one residential rental unit are commonly referred to as single-family properties, while apartment complexes that have multiple rental units are known as multi-family properties. Instead of buying one property at a time, these investments allow you to purchase several properties within the same building. At first glance, it might seem that getting a loan for a single-family property would be much easier than trying to raise money for a million-dollar complex, but the truth is that a multifamily property is more likely to be approved by a bank for a loan than an average home. Investors should look for high-growth, high-yield areas where properties are in high demand and well-maintained neighborhoods when investing in multifamily properties.
However, a multifamily property generally generates enough income to allow investors to hire a property manager to handle day-to-day operations and take care of necessary repairs. The amount of money multifamily properties produce each month gives their owners space to take advantage of property management services without the need to significantly reduce their margins. You should also consider property value increases, monthly NOI increases, or tax breaks given to owners of multifamily properties. Investors can depreciate their multifamily property to offset a large portion of the rental income they collect from the property each year.