Why Multifamily Real Estate Investing is a Winning StrategyJun 26, 2023
Real estate is a strategic investment that allows you to earn high-valued capital as you amass greater generational wealth. Real estate is a more stable and steady investment compared to the stock market, which often succumbs to economic headwinds with greater frequency.
There are a number of ways to make a strategic real estate investment. One of the most important bedrocks of a real estate investment strategy is to decide what types of assets you will put your money towards.
Many people choose to invest in single-detached homes and rent them out to willing families. However, in terms of sheer profit potential and the ability to scale up inbound cash flow, multifamily real estate investing is the most winning real estate investment strategy of them all.
What is multifamily real estate investing?
If you’re new to real estate investing, you’re likely unfamiliar with the concept of multifamily real estate investing. You might have never heard the term before, prompting the question to arise in your mind of what exactly is multifamily real estate investing.
In a nutshell, multifamily real estate investing is an investment strategy that pools your capital into large residential properties. Multifamily real estate ranges from anything that includes:
- Apartment complexes
- Condo buildings
- Mixed-use properties (residential and commercial)
- Low income housing
- Retirement homes
The common denominator in each of these property types is that hundreds, if not thousands of people can live in each of these buildings. This is why the name multifamily is applicable because multiple families rent space in each complex.
Advantages of multifamily real estate investing
Some investors believe multifamily real estate investing is too expensive, too complicated, and too overwhelming. At times, it can feel like an enormous undertaking, but multifamily real estate investing is far more advantageous for your financial future than you might otherwise believe.
What are the common advantages of multi-family real estate investing? Let’s break down three of the greatest advantages and how they each help you secure future financial freedom.
Minimized risk and steady cash flow
Let’s go back to where we began on the point about the stock market. If there’s one word to describe stock market investing, it’s instability. Any whiff of an economic slowdown can trigger a calamity in the market that instantly sinks the value of your many investments.
Similarly, investing capital in a single detached home carries its own risks. If the tenant falls behind on rental payments, or simply disappears without notice, you’re still on the hook for the mortgage. Losing those rental payments disrupts your cash flow, potentially placing you in a very financially perilous position.
In contrast, multifamily real estate investing dramatically reduces each of these risky scenarios. Since you’re renting out dozens of spaces all at once, one bad tenant will have very little impact on your financial situation. You can weather the storm and maintain your cash flow from your other rentals as you find a new tenant for the remaining space.
Financing and inspections are easier tasks to complete
If your objective with real estate investing is to amass a large portfolio of properties, you need to consider all the steps involved in that process. Every real estate transaction requires due diligence, building inspections, legal negotiations, and capital financing. There are a lot of sequences to complete any real estate deal.
Now, consider all those steps, along with the complexities within each one of them, and multiply by the amount of real estate you wish to invest in. Going through those entire sequences for 10, 20, 30, or more single detached properties takes up a lot of your own time, money, and energy.
In contrast, you only need to go through the process once if you’re investing in multifamily real estate. Once the building inspection is complete, the negotiations are finalized, and the financing is secure, all that’s left is to take possession of the deed of the property. You can then start renting out space to tenants and earning back money on your investment.
You can hire a property manager to oversee building maintenance
Budgeting is an important part of any real estate investment strategy. Before you complete the transaction, you need to account for what you can afford to maintain the properties you acquire.
You’re likely working a full-time job with other responsibilities to your family and day to day life. Time is a luxury you likely don’t have to maintain the properties and protect your investments. That’s why, within your budget, you should account for a full or part-time property manager to oversee the building.
If you’re investing in multiple single detached properties, hiring a property manager for each building becomes an incredibly expensive endeavor. You’re adding an abundance of additional costs to your budget, making it more challenging to earn a lucrative return on your investments.
However, multifamily real estate investments lie within one property. It’s a much larger complex and you’ll likely need to hire a more expensive property manager to maintain the building. But you’re only paying that cost once, which is a far more feasible option for your budget. The property manager can oversee the day to day needs of the building while you turn your focus towards how to increase the value of your initial investment.
How to get started with multifamily real estate investing
If these recommendations have ignited your passion for real estate investing, fantastic! That’s the whole point of creating these helpful guides.
Should you now comprehend the potential value that comes from multifamily real estate investing, the next logical question is how do you get started. What do you need to know about beginning your real estate investment journey?
By contacting one of our experienced investors, you’ll receive all the coaching you need to begin your journey into multifamily real estate investing. We’ll help you articulate your investment goals and create a blueprint for multifamily investment success!
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