Why multi-family real estate?
Over the past 25 years, multi-family real estate reported average annual returns of 9.75%, which is the highest in the sector. Additionally, according to CBRE research, the sector ranked the second least volatile commercial real estate wing with a volatility rate of 7.75%. If you still have second thoughts on investing in multi-family real estate, the following reasons will change your mind.
Easier to finance
Acquiring an apartment building is often more expensive than purchasing a single-family home. However, securing funding from a bank is easier when purchasing or constructing a multi-family building than a single-family house. Bankers understand that rentals have a higher cash flow every month, which remains the case even if some tenants vacate their rooms. In single-family buildings, if one tenant vacates, then the building will be 100% vacant, and there will be zero cash flow.
Easy property management
Hiring property managers for your multi-family building makes financial sense. These property managers take over cumbersome responsibilities such as screening and evicting tenants, handling maintenance, and collecting rents. If you have one or two single-family buildings, hiring property managers do not make financial sense as you can do these tasks yourself.
Easy to grow a portfolio
If you wish to build an extensive portfolio of rental units, you should consider investing in a multi-family building. For instance, building a 30 unit apartment building through a construction company such as Florida Coastal Construction is more manageable than building or purchasing 30 different single-family units.
Increasing demand for rental properties
Millennials have an unquenchable thirst for rental properties. According to the US Census Bureau, only 31% of millennials aged between 30 to 34 years, and 34% of those aged between 24 to 29 years owned homes in the 2020 census report. The rest preferred staying in rented apartments hence raising the national demand for rentals units.
Rent prices are increasing
As the demand for rental units increases globally, the prices are slowly skyrocketing. Additionally, unlike other commercial real estate properties such as office and retail spaces with a standard five-year lease, multi-family leases are only valid for one year, and you can adjust the rent with every lease renewal.
Increase demand for workforce housing
The workforce housing category is multi-family apartment units for middle-class families that do not have amenities afforded to the high-end apartments. With the increase in the production of high-end apartments, there is an expected workforce unit shortage; hence the demand will soon increase. This is the best time to invest in such buildings.
Unlimited tax-free refinances
Investors can borrow against their multi-family building by refinancing their loans and don’t have to wait until the building resells to realize gains. The beauty is that you can do this without incurring any taxes. Additionally, these owners can refinance as often as possible without incurring any taxes with each refinance.
These benefits are intrinsic to the multi-family real estate sector. A knowledgeable real estate expert can guide you in making informed investment choices on different categories of multi-family apartments.0