Why investing in multi-family real estate is better than single-family
Why investing in multi-family real estate is better than single-family
Real estate investing is a fantastic investing proposition if you look to grow your capital actively and wish to stay away from the volatility and uncertainty of the stock market. The beauty of real estate investing is that you can employ multiple strategies and approaches when you invest.
You will come across two types of properties when you look to invest in real estate: single-family and multi-family. In simple terms, single-family properties are buildings with one unit to rent. On the other hand, multi-family properties are buildings having more than one unit to rent.
But, which one should you go for? No, you do not need to think about it too much! We have all the bases covered for this. Here, we will outline the important things you should consider before making this all-important decision.
The time required to grow your portfolio
If a property investor wants to build a large investment portfolio of real estate units, investing in multi-family would suit him more. Purchasing a 25- unit apartment complex is less time consuming than acquiring 25 different single-family units. In the former case, you do not need to work with 25 different sellers and inspect properties in 25 different locations. You will have better peace of mind and can avoid a lot of headaches when compared to the latter.
Which one is easier to finance for a lending institution?
Lending institutions regard a multi-family property as a less-risky proposition because it is more likely to generate better monthly cash flow when compared to a single-family rented property. If a single-family home is vacated by its only tenant, it won't generate any income for the owner at least for some time. But, even if there are 2 vacancies in a 20 unit property, it will still remain occupied by 90%. Therefore, a multi-family property will be less vulnerable to foreclosure as compared to a single-family property. All these factors would prompt lending institutions to provide loans easily and at more competitive rates for multi-family investments.
Which one provides more rental income?
As multi-family properties include more units and more tenants occupy them, rental income is obviously more in such properties. The amount of money generated by such properties gives the owners the luxury of hiring property management services without essentially cutting into their margins. If you do not like to take the trouble of managing the day-to-day operations of your rentals, you may hire a property manager to carry out tasks such as finding tenants, collecting rents, managing evictions, property maintenance and so on. But having such a luxury is not a financially viable option for single-family investors because of their small portfolio.
Real estate appreciation
When it comes to forced real estate appreciation, multi-family investment is the clear winner. Every time a repair is made on a single-family property, real estate appreciation is forced on a single unit. However, any such repair on a multi-family property forces appreciation on all the housing units collectively. This way, you can save a lost on the costing part.
Considering investing? Don’t hesitate to reach out to me.
Chris Salerno
QC Capital Group
Comments