Have you considered investing in real estate, but aren’t sure about how to get started or finance your plan? Whether you are interested in owning a rental, flipping a home, or buying and holding property, there are multiple compelling exit strategies that may be right for you. But with all of these different options, it is easy to get lost or feel anxious about whether your strategy will be effective.
Whether this is your first time considering an investment or if you have already started drafting your strategy, I am here to affirm that the time is right for you to consider multifamily property investing, and grow your dream real estate portfolio. It sounds intimidating, but the basic strategy to multifamily property investing is straightforward, simple, and accessible to novices as well as seasoned real estate investors.
What is multifamily real estate investing?
The fact is that multifamily property investing is no more challenging than the most basic real estate ventures. In fact, it may be the easiest way to invest in the commercial real estate industry.
Here are five reasons why:
1. Live Mortgage-Free While Your Tenants Pay Your Principal
Multifamily real estate investing grants entrepreneurs the ability to reap the benefits of their holdings while living in an adjacent property. For example, if you purchase a 10-unit building, you may be able to live in one unit while you rent out the others. In an ideal market, the income generated from your rental properties can also cancel out the amount you owe on your mortgage, and then some. By investing in multiple properties at once, you can subsidize the cost of your own housing using the earnings from your other properties. Living without a mortgage sounds like a fantasy, but the smart investor can make it a reality.
2. Less Maintenance and Management
In addition to living mortgage free–multifamily real estate investing requires less maintenance than your typical single-family property. How can this be the case? At face value, it may seem counter-intuitive, but multifamily properties all share common attributes. Even if you have multiple units, each of them will share a single roof, HVAC unit, yard, and foundation. The common features shared by a multifamily property are far easier to manage than having several single properties that have separate utilities. By having a multifamily investment, you will be able to act as a property company while avoiding the stress and headaches that come with managing multiple single-family properties. This means you will spend less money on maintenance and management, saving you more money in the long run.
3. Lending Made Easier
All the benefits of multifamily property investing don’t come without a price. Likewise, the aspect that keeps most investors away from this particular form of investment is the price of entry. This is a reasonable concern–in most cases, the initial cost of a multifamily property will eclipse a single family home. The math is simple: the greater the number of components, the higher the cost. However, there are hidden benefits to having a multifamily property rather than a single family home.
Lenders are more likely to approve loans for multifamily properties than single-family homes. Why? The answer is straightforward: multifamily property complies with an increased propensity toward monthly cash flow. By having multiple units, there is a greater chance that the units will be occupied and generating income for you, rather than single homes where all it takes is a single vacancy to turn into a non-performing advantage. It is entirely possible for multifamily properties to “stay in the black” even with a couple of vacancies. Ultimately, owning property is a numbers game that favors those with multifamily units.
4. Banks Aren’t Your Only Option
Banks aren’t the only lenders eager to provide loans to multifamily property traders who are seeking funds. Not surprisingly, private money lenders also understand that multifamily real estate investing is a powerful investment strategy as well. Because private cash loans are asset-based, private lenders are more likely to lend on investments with promising, protected returns. The figures for multifamily property investments are more attractive and more easily obtainable than the revenue generated by single-family properties, and you can leverage this to your advantage when you are seeking funding.
5. More Scaleable
For investors with lofty aspirations, multifamily real estate investing is also a perfect way to scale your rental portfolio. If for no other reason, it is much simpler to obtain a 50-unit apartment construction than 50 individual, single-family homes. Rather than managing 50 distinct sets of paperwork, communicating with 50 buyers, attending 50 different closings, signing 50 separate contracts, and shutting 50 escrows, owning a 50 unit multifamily property is more straightforward.
A multifamily property will provide you with 50 units in a single closing, which is more time and cost effective. Unlike purchasing 50 single-family homes that will most likely require multiple financing options, obtaining 50 units through a multifamily property will need only one.
This is the single most significant advantage of multifamily real estate investing: in the total amount of time it will require from you to receive acceptance from one lender, you may potentially have a multifamily unit under contract, ready to proceed.
Don’t let the name fool you–multifamily real estate investing can be made simple, and maybe the perfect investment strategy for you.