3 Reasons Why You Should Invest in Multi Family Real Estate

Becoming truly wealthy will require you to do more than just save money. Rather, you are going to have to look into things like investing your money somewhere, making your money work for you essentially. A lot of people turn towards the stock market, thinking that this will lead them to infinite riches. However, the fact of the matter is that playing the stock market could potentially end up costing you a great deal. It would be a much better idea for you to look into real estate.

This is because of the fact that real estate gives you the potential to grow your initial investment by leaps and bounds without making you suffer through the same pitfalls that the stock market could potentially end up putting you through. It also gives you a more hands on role in growing your capital, something that will definitely appeal to those investors that want a little more control over how capital growth is achieved. You essentially have a lot more options when it comes to real estate because of the fact that there are so many different approaches that you could go for, each of which will give you unique advantages over the other

One of the safest and most profitable techniques that you can use while investing in real estate is to invest in rental property. There are a lot of benefits associated with this kind of methodology. Rental property can give you a stable income that you would receive every month. An added benefit is that the value of your portfolio will increase on its own as time goes by. Real estate gives you so much control over your initial investment that there are a further two subcategories within rental property that you could look into.

These two subcategories have to do with the type of tenants that you are going to be involved with. You can either invest in a single family unit, or you could opt for a multi-family property. Multi-family properties are basically places such as apartment buildings or other areas where a number of families will live instead of just a single tenant. You can also refer to such properties as multi-tenant properties. While you should definitely bear in mind the fact that multi-family properties will be a more expensive investment, they can pay much higher returns as well. Listed below are three of the most prominent benefits that you will receive if you look into multi family real estate.

#1 Easier Financing

A lot of people might advise you against investing in multi family properties because of the fact that these properties are going to involve a lot more infrastructure and are thus going to be significantly more expensive than single family homes. After all, single units can be purchased within tens of thousands of dollars. Multi family properties on the other hand will cost hundreds of thousands if not millions of dollars to successfully complete. Bearing all of this in mind, you might make the assumption that getting financing for a single family home is going to be much easier than going for a million dollar loan that would allow you to build an apartment complex. After all, getting small loans is easier than getting big ones right?

However, banks are not going to think of it in those terms. Indeed, a multi family property is actually more likely to get financed. This is because of the fact that the probability of getting a consistent cash flow is more likely with a multi family property. Since your property will have so many tenants, the odd late rent payment as well as a few vacant properties are going to be less of an issue. You will still probably get enough to allow yourself to repay the loan on time. On the other hand, if you are building a single family home, your entire income from that property will depend on a single source. If the rent payment is late or if the property is left vacant for a time, it will not be giving you the revenue necessary to help you pay the loan back on time. Hence, you are going to be considered more likely to pay back the loan if the property you are building will have multiple tenants.

Basically, a multi family property makes you a somewhat risk free investment, at least as far as paying back your loan concerned. In light of this, not only is financing going to be more likely but chances are that banks would be willing to give you a more relaxed interest rate. This is because of the fact that they would want you to become their customer since you are going to be investing in a high value property that the bank is going to own until the loan that was used to buy or build it has been fully paid off.

#2 Makes Portfolio Building Easier

One of the most important things that you need to think about when you are trying to use intelligent investments to become as wealthy as possible is your portfolio. You need a portfolio that is both diverse and considerably large if you want to remain viable in an increasingly competitive modern market. Building a portfolio with single family rental properties is going to end up taking a very long period of time which just won’t do because of the fact that you are going to have to build a portfolio fast if you want to grow in a manner that is in pace with modern business.

Single family rental properties take a lot of time to acquire. This is because of the fact that they are all going to come from different sellers which means that each property is going to require you to haggle for it individually. You are also going to have to inspect each property individually. This can make building an adequate portfolio a process that is both arduous as well as time consuming, especially when you consider the fact that finding single family properties within close proximity to one another is going to be next to impossible so there is definitely going to be a lot of travelling involved when you are trying to buy these properties. Another big problem that is associated with building your portfolio using single family properties is the fact that sometimes you will have to apply separately for a loan for each property. Since the aforementioned point has already told you that loans for single family real estate are less likely, you can see why this can create yet another problem that you are going to have to contend with.

On the other hand, multi family properties are not going to give you any of this grief. They are by their very nature in very close geographical proximity to one another. All of the units are going to be part of the same property, which means that there will be a single price. And, of course, this single price will mean that you will only have to take a single loan for the property to boot. To top it all off, the inspection process will be a lot simpler as well since the units will have been built similarly to one another so there won’t be a new blueprint to look through each time.

#3 Property Management Becomes More Financially Realistic

Simply buying a property and renting it off to someone is not going to be all that you have to handle. The properties you own need to be managed as well. Most landlords tend to hire someone to do that for them, there are quite a few property management companies out there that you can look into for this purpose. They will handle the management of the property for a portion of the rent that you are receiving. People that are managing your property for you are going to help make sure that you get your rent money on time, will look for tenants for you and will work on maintaining the property in question.

However, if you own a single family property, chances are that you are not going to be able to hire someone like this because of the fact that you are just not receiving enough revenue to make this possible. If you own a multi family property, you will have a lot more incentive to look into the various management alternatives that are available on the market.

In Conclusion

The strategy of opting for multi family homes is definitely going to help you make the most of your portfolio and start generating a significant amount of revenue quickly. It is highly recommended that you look into multi tenant properties so that you can see the benefits for yourself. From financing to rent collection to hiring a property manager, pretty much everything about multi family properties make them a much smarter investment for the people that are looking to build them.