3 Reasons to Invest in Multi-Family Real Estate
Posted by Techyscouts | Posted on 02/04/2022
Choosing what to invest in real estate can be a hard decision because there are so many options to choose from, especially in California. When it comes to investing in residential real estate, there are two main types of properties that one can invest in single-family and multi-family. Single-family properties are residential buildings with only one available unit to rent, while multi-family properties (such as apartment complexes) are buildings with more than one rentable space. While it may be easier to invest in smaller homes, there are several advantages to investing in large residential complexes. Mike Millea has 3 essential tips to help you consider investing in multi-family real estate.
1. Easier to Finance
While it can be more expensive to invest in multi-family homes, it is easier to finance. The cost to acquire an apartment building is significantly higher than the cost to purchase a single-family home as an investment. While it might seem as though securing a loan for a single-family property would be easier to get, the truth is that a multi-family property is more likely to be approved by a bank for a loan than a single home. This is because multi-family homes consistently generate more cash flow every month (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. With this, the likelihood of a foreclosure on an apartment building is low. 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 property owner.
2. Easier to Build a Portfolio
Investing in multi-family properties is a very good way to build a relatively large real estate portfolio. Acquiring a 20 unit apartment building vs. 20 different single-family houses are a lot easier and much more time-efficient. With the latter option, one would need to work back and forth with 20 different sellers and require opening up 20 different loans for each property. This could all be avoided by simply purchasing one single property with 20 units.
3. More Financial Flexibility to Hire a Property Manager
Some real estate investors don’t actually want to manage their properties, and instead, hire a property management company to handle the day-to-day operations of their rentals. When a property manager is hired, they are typically paid a percentage of the monthly income that a property generates. Many investors who own one or two single-family homes do not have the luxury of contracting a property manager because it would not financially fit due to their small portfolio. However, multi-family properties do produce enough money to pay for a property manager without the need to significantly cut into their margins.
Get Real Estate Advice From Mike Millea!
Still, deciding on whether to invest in single or multi-family properties? Contact Mike Millea today! He and his expert team provide advice to real estate investors in the Los Angeles, CA area. If you have any questions or concerns, please feel free to reach out to us! We can’t wait to work with you!