alt-text: a building where you can invest in a multifamily property
Investing in real estate has always been a very effective strategy as it’s a tangible asset, unlike stocks or bonds. Among a wide range of choices when it comes to types of property, multifamily housing seems to be the most profitable. Not only that, but there are countless benefits if you invest in a multifamily property as well. So, if you’ve decided to take the plunge and purchase this type of real estate, you’ll want to learn all about it before entering the arena. With this in mind, we’ve outlined the most important reasons why you might want to make this decision. Read on and take notes!
Bigger cash flow
While there are as many strategies as there are types of properties, we all agree that the best investments yield the biggest returns. So, if you’re main goal is building wealth, then by all means invest in multifamily property. There’s no need to explain how a duplex or garden apartment can generate a higher rental income than a single-family home. Once you gather the buying resources and actually purchase the property, you can be sure of steady passive income from tenants.
If you play your cards right and strategically choose the location, it can even mean a gradual increase in monthly revenue. Of course, a location alone isn’t a guarantee. Improving the quality of individual units is still necessary, especially in the long run. This can, of course, be easier to manage as you’ll have access to a steady sort of income even during fluctuations. For example, it’s much simpler to handle a few vacancies than an unoccupied single-family house. That being said, the risk of foreclosure is much lower. Sounds promising so far, right?
alt-text: a jar of coins;
Caption: Invest in a multifamily property if you want a steady cash flow
Obtaining loans
More often than not, in order to invest in a multifamily property, you’ll require some start-up capital. Yes, we all think of securing loans as a daunting process, no doubt about it. However, you’ll be surprised to learn that these types of properties have more likelihood of getting approved. This is because multifamily properties are considered to be commercial properties as well. As mentioned above, they are considered a lower risk for the lenders, since they rely on multiple tenants.
Of course, not all loans are created equal, so choose your lender wisely. Just like you’d hire an affordable yet reliable company such as City Movers during relocation, you’ll want to research different types of loans as well. In the case of multifamily dwellings, FHA loans may be the smartest option. They offer the lowest down payment, as well as the longest loan terms. Basically, the goal is to make the property pay for itself, by using the rental income. Now if this isn’t the ultimate dream of investors, what is?
Your investment portfolio will grow faster if you invest in a multifamily property
Whether this is your first-time investment or you already own properties, you probably already know about the importance of building your portfolio. It doesn’t just represent your achievements so far, but it’s also an indicator of your credibility.
So, if you wish to grow your portfolio in no time, just go with the phrase ‘The more the merrier’. Some of the first time home buyers’ mistakes to avoid, especially if you want to make it big in the investment business, is to buy a single-family home. Simply said, when you invest in a multifamily property, it will generate bigger returns faster. Hence, it makes more sense to purchase a 10-unit apartment building than have 10 different houses scattered in different locations.
Keep in mind that this is a dynamic and strategic business, so it’s all about careful planning. It’s much better to spot a sought-after location with a multifamily property which will yield high returns. Following migration trends is also key to understanding the difference in the value of certain properties. For example, a large move to a distant place like Bahrain where ex-pats are thriving is currently a great business opportunity.
alt-text: signing a lease before you invest in multifamily property; Caption: An good investment portfolio is your best advertisement
Easier management
But this kind of reasoning isn’t purely for financial gain either. Sure, it’s the first thing investors look for, but practicality plays a large role as well. Say you’re the owner of a couple of properties in town, as we’ve outlined above. This means you’ll have to drive around and check each individual property from time to time. No matter how small the town is, this is simply not time efficient.
For this reason, we believe that you should search the listings and find a location with a multifamily property. That way, you get to check only one place, fix only one roof and mow only one lawn. All of this will largely decrease your costs of maintaining the property too.
Of course, in case you feel it will still take too much of your precious time, you can always hire assistance. You’d be surprised how many investors work with property managers who keep track of everything for them. That being said, chasing unpaid debt or dealing with repairs doesn’t have to be your concern. Quite convenient, isn’t it?
alt text: a residential building where you can invest in a multifamily property; Caption: One multifamily dwelling is much simpler to manage than a couple of single-family homes in different locations
Tax benefits
Last but not least, once you invest in a multifamily property, the government will recognize this as providing housing. As a result, you’ll be able to take advantage of tax incentives. Of course, they will vary depending on the city or country your property is in, but nonetheless, they should be substantial. Here are some of the benefits you can expect once you become the owner of multifamily housing:
- Depreciation expenses
- Real estate Investment Tax Deductions
- Cost-segregation
- 1031 Exchange tax break
- Passive Tax Income
However, understanding all of this without previous experience in investments can be complicated. To save time, you can hire an experienced professional to assist you in deciphering the transactions. A trustworthy real estate lawyer can guide you through the entire process so there are no misunderstandings on any real estate matters.
Author bio: Ben Howards is a professional blogger in the field of real estate and moving company businesses. His goal is to educate the public and possible clients on topic regarding property purchase and relocation. His informative articles can be found on his blog, as well as on his Facebook page.
Meta description: Are you planning on purchasing your first residential property? Then head over here and learn why it’s a good idea to invest in a multifamily property!