6 Benefits of Multifamily Investing

[Jorge Abreu]

6 Benefits of Multifamily Investing

Scalability

If you want to develop your investment portfolio quickly, investing in multifamily properties is a better option than single-family rentals (which you would need to acquire one at a time).

It also provides the chance to move into commercial real estate investing as bigger multifamily properties (those with five or more units) begin to fall under commercial real estate, providing even more income flow.

Cash Flow

One of the most appealing aspects of multifamily real estate investing is the promise of consistent monthly cash flow from rental income. Multifamily residences have several tenants paying rent, whereas single-family homes have only one or a few occupants.

Even if one property is vacant, you'll most likely have cash flow from the other apartments. However, do your homework and develop an investment strategy before investing in multifamily buildings.

Determine if your rental revenue will cover your net operating costs (NOI), which will include mortgage payments, insurance, taxes, property management, and extensive property upkeep, based on the fair market value of your units.

Passive Income

Real estate investing in strong real estate markets is a terrific strategy to generate passive income. You'll have little day-to-day work on your multifamily investment property if you employ a property management company to handle upkeep and communication with renters.

This frees up time for you to concentrate on your day job or your next investment.

Easier Financing

Multifamily homes often have a greater fair market value than single-family homes in the same region often, but it's also easier to get financing for multifamily properties when it comes to investment properties.

Because the cash flow for an apartment complex is more predictable than that of a single-family rental, multifamily properties are less riskier for banks, therefore you may be able to negotiate for cheaper interest rates.

High Rate of Appreciation

Even if your multifamily property does not generate immediate cash flow, it retains its value. And the value of that asset grows with time. This is true for most real estate properties, but the pace of appreciation for multifamily properties is higher. However, there is no guarantee that you will be appreciated.

Also, if you want to increase the value of your property, make sure it is well-maintained. When your property is well-maintained, you may charge a reasonable rental rate, which attracts more potential tenants.

Tax Benefits

Investing in multifamily real estate provides appealing tax advantages. Amenities, property management fees, repair and maintenance bills, insurance payments, and any marketing expenses can all be deducted from your maintenance and operating costs.

Even if the fair market value of the property is technically rising, you can take advantage of real estate depreciation and cost-segregation tax benefits in the long run as your building and its appliances age.

And for all the above reasons, multi-family real estate would be a sound investment decision for real estate investors looking for passive income.