28 May Real Estate Investment | Benefits of Investing in Multifamily Real Estate
Benefits of Investing in Multifamily Real Estate
Alt: An apartment building representing investing in multifamily real estate
People who are looking to invest in real estate have a good range of options before them. One of these options is multifamily housing. And there are many benefits of investing in multifamily real estate. The primary one is that this is an excellent option if you want to make some passive income. Moreover, purchasing such property will involve some tax breaks as well as more loan opportunities. So financing these properties is easier. But before making the final decision and investing in multifamily housing, you need to understand what this type of property is.
What is multifamily real estate?
Multifamily real estate implies multiple housing units in a single building or a group of buildings. Depending on the number of units contained in a building, there are different building types, construction styles, and amenities included. For instance, there are duplexes, triplexes, quadplexes, townhomes, and apartment complexes.
Moreover, multifamily residential properties can suit different markets. These can be excellent affordable housing options for students and low-income families. However, there are also luxury options for the more well-off renters.
Furthermore, it’s important to know that if a property has up to four units, it is a residential property. But, if there are more, it will have a commercial property label. Also, zoning will determine the type of rental activity. Finally, the number of units in a building will significantly impact your financing options and Return on Investment you can expect.
Top benefits of investing in multifamily real estate
The previous section mentioned all essential aspects to consider before deciding whether to invest in multifamily real estate. Still, if it still sounds interesting, let’s look at the most striking benefits of this type of investment.
Investing in multifamily real estate will provide a steady income
Given that renters pay monthly, this will provide a steady cash flow. Moreover, leases usually last at least a year, and there are state and federal regulations that dictate the terms of the lease and the responsibilities of the tenant and the owner. Also, tenants can only break the lease provided they have a reasonable cause to do so. That makes the monthly income pretty secure for the duration of the lease. Still, you should know what to look for when interviewing potential tenants.
Although occupancy turnover in apartment buildings is higher than in single-family units, it has its benefits. Shorter leases allow for increasing rental rates between two leases should that be necessary.
Multifamily housing investors can enjoy significant tax benefits
As a reward for providing housing for the residents of a particular area, the government will reward you with some tax incentives. Investing in real estate makes you eligible for depreciation tax benefits. Different factors will affect the depreciation credits you reap, so it would be best to discuss your particular situation with a tax professional. You can also research rental property tax deduction options to gain a better understanding.
Multifamily units have a high appreciation rate
Multifamily property value increases over time, as do most of the other real estate types. However, the appreciation rate of multifamily real estate is higher. Beware, though; nothing can guarantee appreciation, so you have to invest wisely.
On top of that, you need to make sure you maintain your property. That is the best way to hold and even boost its value. A well-maintained property will attract more renters and allow you to set a higher rental price.
You have better loan opportunities for multifamily real estate
Since there are multiple units in one building, and the investment is spread across them, lenders feel more comfortable. Additionally, these types of properties typically hold their value. As a result, multifamily investors enjoy better financing terms.
You can live in one of the units, rent the other units, and keep an eye on everything
One option is for you to live on-site. You can have one of the units for you and your family while others are for rent. This comes with an additional benefit. If you live on the property, you become eligible for an owner-occupied multifamily housing loan which comes with lower rates. At the same time, your tenants will contribute to your monthly mortgage payments.
This is an excellent strategy for investors who are looking to get into real estate. So, if you are one of them and have found the right property to invest in, you may be in for a relocation. Sometimes, good opportunities are found further than you have initially thought. In that case, hiring movers to help you carry out your long-distance move and transport everything to any part of the state will be necessary. Still, this is not something to be afraid of, as benefits are more than likely to outweigh the risks.
Multifamily residential property investment carries little risk
While there is always some risk involved with any type of investment, investing in multifamily real estate comes with a low-risk margin. The only thing you have to worry about with multifamily rentals is the vacancy rate. Therefore, it is essential to do your homework before you purchase a property. Get the know the location and make an effort to market your property well. Also, given that you will have several separate tenants, it’s unlikely you will have to deal with a complete vacancy.
Ultimately, we have already mentioned that the value of multifamily real estate grows over time. So, even with some vacant periods, the risks are pretty low.
Multi-unit properties are easier to manage
It’s way more manageable to handle five units under one roof than the same number scattered in different locations in a city. Moreover, while it would be a waste of money and an unsound move if you have a single rental unit, hiring a property manager to manage multiple units would make a lot of sense.
As you can see, there are many benefits of investing in multifamily real estate. Besides the steady cash flow, better loan opportunities, ease of management, and tax benefits, this is a pretty low-risk investment. Also, you won’t have to worry about its deprecation much as the value of these properties tends to remain steady and grow over time.
Meta: There are many benefits of investing in multifamily real estate. So, if you are toying with this idea, click here to learn more.
Other articles that may be interesting… “Screening Tenants for a Rental Property: What to Look for,” “7 Benefits of Renting Shared Office Space,” “Beginners Guide to Real Estate Investing – How Best to Evaluate a Potential Rental Property,” “Real Estate Investing – Renovation on a Budget.“
Please feel free to search all available real estate on the Western NY Real Estate Search page. Or, call, text, email me with any questions, or to set up a free consultation.
Real Estate Invest Opportunities