Multifamily properties are vital to the real estate industry. This type of housing is seen as the most affordable and the best housing option for families. As well as people who are at different stages in their lives. Real estate investors also prefer having these types of properties, as you can ensure a lower vacancy rate in most cases. This is because there is a high demand.
According to research by CBRE, the world’s largest commercial real estate investment firm, from1992 through to 2017, multifamily real estate provided the highest average annual total returns. This came in at 9.75%. It also had the second lowest level of volatility 7.75% of any commercial real estate sector.
So if you are looking to diversify your portfolio multifamily property a great investment. So what are the benefits of investing in a multifamily property? Listed below are some of the key reasons, and how you can make the most of your multifamily property when you have purchased.
Multifamily Properties Are An Affordable To Buy
When you look at the per-unit basis, the cost of constructing a multifamily property is more affordable than other types of real estate properties. This makes it more cost-efficient and it also means it is lower risk. And if you apply for a loan to build or buy a multifamily property, you can usually get lower mortgage financing rates.
Lenders know that with more tenants in a multifamily property it’s more likely that even if you have tenants who leave, you can continue to maintain payments. The owner of a multi-family property has a stronger cash flow than the owner of a single-family unit.
There is also a lower foreclosure rate on apartment buildings. This happens a lot more frequently with single-family homes and it’s why mortgages can be obtained at a more competitive rate. So this means there are lower operating costs. Which of course adds up to more revenue.
Multifamily Properties Are A Safer Investment
We have seen a lot of ups and downs in the stock market and this is something that is not likely to change. However, multifamily real estate is a safer place to put your money. The reason is your rental will continue to generate cash flow for you. And your rental will appreciate even when there may be fluctuations elsewhere.
It’s also a lot easier to look after 12 units in one place, rather than 12 different units all over a city or a state. You can also justify hiring a property manager if you have a multifamily property.
Multifamily Properties Can Offer You Tax Breaks
If you are providing housing for a number of residents in a city the government wants to thank you for it. They offer tax incentives to you for doing this. It will depend on what classification your property has. But these tax breaks mean more money in your pocket and ultimately a better return.
Multifamily Properties Have A High Appreciation Rate
While you may not see an immediate cash flow return on your multifamily property they will hold value. This will increase and is at a higher level in a multifamily property. You are in a position where you have multiple units to choose from that you can improve. And if you improve the quality of your units and invest on improving the shared spaces, your tenants will be happy and they won’t want to leave. They will keep renting a unit in your building for the foreseeable future. And if you keep your real estate well maintained, it will generate you even more cash because you can attract a higher paying tenant.
A Multifamily Property Can Generate More Revenue
Instead of getting one rent a month, you get several with multifamily properties. This is also means if you lose one or two tenants, then you will still have an income. And it means you can maintain any payments or your mortgage. So you will be covered while the search is on for new tenants.
Your Portfolio Will Grow More Easily
When you have multifamily properties in your portfolio you have more income. And more income results in the ability to purchase more property. This is because you have more tenants paying rent from your units. This will happen a lot more quickly than if you had several single-family residences. And while the initial investment will be higher, you have more long-term return and ROI, which makes it worth it.
Multifamily Properties Can Be Managed By A Property Manager
A multifamily property will often demand a property manager. All those units can become a time pressure, and cause worry and stress. This is where a professional property manager can be a huge asset and they can do the managing for you. Then you won’t have to worry about all the consuming tasks of finding tenants, dealing with vacancies, and any repairs. That will all be done for you. Coastline Equity does this for our clients with multifamily properties. We handle everything from the repairs to chasing unpaid rent.
Renters Want Multifamily Properties Instead of Homes
In today’s climate, the multifamily property is a more popular way of living. Millennials want to live in a space with a sense of community. Now renters want they want a clubhouse, gymnasium and swimming pool with other premium features.
Data from the U.S. Census Bureau, reveals multifamily homes are the most common form of housing for the millennial generation. The national rate of homeownership for the population overall was 64% in 2016. But for those aged 25 to 29 it was just 31%. And for millennials aged 30 to 34 it was only 45%.
Baby boomers are also looking to rent rather than buy. The National Multifamily Housing Council and National Apartment Association cited in a 2017 report that renters aged 55 and above account for more than 30% of rental households.
Renters are also looking for properties that are close to amenities. That includes restaurants, stores, travel infrastructure and entertainment they can use regularly.
In conclusion, of course any type of real estate investment is a risk. And if you want to invest in multifamily property you should always look at the pros and cons. Make sure you do your research. Once you have done this and you have a full scope of what you can invest in, you can look at achieving your financial dream.
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