Some investors cannot deal with the very volatile stock market and they, therefore, find real estate to be a great investment alternative. It also works well for investors who want to actively grow their capital rather than have their money in a fund under someone else’s management.
Real estate investing is awesome because there are so many strategies that you can successfully employ. Take Zhang Xin and Donald Bren, for instance. They are both real estate moguls who became billionaires by developing different commercial and residential properties. Sam Zell, Equity Residential founder, built his wealth slowly via an income producing portfolio of rentals.
There are many other real estate investors who have become wealthy through house flipping. Investing in rental properties is a great investment for people who would like an extra source of income and in addition, a slow and steady appreciation of portfolio value. In residential real estate, you can invest in two major types of properties: multifamily and single family. A single-family property consists of only one renting unit while a multifamily property (apartment complex) has a number of rentable spaces. Investing in multifamily properties is not that easy but it has its advantages.
See these three reasons why you should consider multifamily real estate instead of single family real estate. Single family homes are usually cheaper that multi-family homes when you are buying for investment purposes. Because of this, investors think that it is harder to get a loan for a multifamily property than it is to get financing for a single-family property. What they do not know is that banks are more likely to approve a loan for a multifamily property because such properties are consistent in generating monthly cash flow.
Having a few vacancies or some tenants paying rent late does not stop the cash flow. In the case of a single-family unit, when a tenant moves out the property becomes 100% vacant. Another thing, single-family rentals have higher chances of a foreclosure. A multifamily property, therefore, poses less risk for the lender. If you want your rental units’ portfolio to grow, investing in multifamily properties is a good option.
An apartment building with 20 units is better than 20 single family homes in different locations in terms of ease of management and time saving. Sometimes, you will need to have separate loans for each of the 20 single family homes which can be hectic. With one or two single family properties, hiring a property manager is not a wise thing to do financially because of the small portfolio.
Multi-family properties, on the other hand, bring in more money and the investor can comfortably enjoy the services of a property manager. There are many strategies that you can use in real estate investing and still become successful. Investing in multifamily homes has a lot of advantages such as the ability to employ a property manager, better access to financing, and better chances of growing your rental portfolio.