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3 Reasons to Invest in Multi-family Real Estate

Real estate can be an alternative for those who are not able to withstand the volatility of the stock market. It is also a better investment for those investors who wish to take an active role in growing their capital, rather than passively putting their money into a fund to be managed by someone else. One of the beautiful things about real estate investing is that there are more than one strategies that can be successfully used.

For example, real estate investing moguls Donald Bren and Zhang Xin both built their billion dollar fortunes by developing various residential and commercial properties. On the other hand, Equity Residential founder Sam Zell created his wealth by slowly acquiring an income producing portfolio of rental properties. Other real estate investors have also made millions of dollar from house flipping i.e. purchasing properties that are in disrepair for cents on the dollar only and renovating them only to later sell them to a new owner.

Key Takeaways

  • Owning rental real estate can be a smart way to diversify your investment portfolio and generate steady income.
  • But, why own just one unit when a multi-family property can multiply your income with only incremental added cost.
  • Multi-family rentals are typically easier to finance, compound returns more quickly, and benefits from economies of scale.

Investing in Multifamily Properties

1: More Expensive But A Lot Easier to Finance

That’s because multi-family real estate consistently generates a strong cash flow every month. This remains the case even if a property has a handful of vacancies or a couple of tenants who are late with their rent payments. If a tenant, for example, moves out of a single-family home, that property would become 100% vacant. On the other hand, a ten unit property with one vacancy would only be 10% unoccupied. As a result of, this the likelihood of a foreclosure on an apartment building is not as high as a single-family rental. All of this equates to a less risky investment for a lending institution, and can also result in a more competitive interest rate for the landlord. 

2: Growing a Portfolio Takes Less Time

3: You’re In a Position Where Property Management Makes Financial Sense

The Bottom Line

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About Amy Harvey

Amy R. Harvey writes forStartUps Sections In AmericaRichest.

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