Real estate can be an alternative for those who are not able to withstand the stressful ups and downs of the stock market. It is also a better investment plan for those who wish to take an active role in growing their capital, rather than simply putting their money into a fund to be managed by another person. One of the beautiful things about real estate investing is that there are many strategies that can be successfully used. Investing in rental properties, or multi-units is a great investment strategy for those who want an additional source of monthly income, to live for free while your tenant pays your mortgage and the slow but steady appreciation in the value of your portfolio.
In most cases, if not all, the cost to purchase a multi-family property will be significantly higher than the cost to purchase a single-family home, although, a multi-family property is more likely to be approved by a lender for a loan than the average home. This is because multi-family real estate consistently generates a strong cash flow every month. This remains true 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.
When you provide housing it’s a good thing for the community and the government thinks so, too. The town in which the property is located likes the idea, because you are helping the residents by providing clean, safe, affordable housing to people who might not otherwise find it. As a result, you can gain all sorts of tax incentives… yes tax breaks! You are able to write off a lot of deductions because owning a rental property is a business. You can depreciate all sorts of things in an apartment building or rental property, and that depreciation takes place over a lengthily period of time. The tax benefits of owning multi-families can be massive.
Multi-Families hold their value at a much better rate than single-family properties. If the property is turnkey it is very simple to take ownership and continue the relationship with the current tenants. If the property needs to be rehabbed or updated, once that is complete you have created a very attractive property for tenants and you are able to generate higher rents. Higher rents and retaining quality tenants means steady cash flow. This will also attract other investors who could be interested in buying the property, if you decide you ever want to sell.
Buying a multifamily property not only makes financial sense, but can also be the safest way to make decent money in real estate. When you have more than one unit, the risk is spread out. When one unit goes vacant, you still have the rent from another. If your expenses increase slightly, you can weather it from the other units. You are eligible for many tax deductions. If you maintain and update your properties you retain and increase their value. Multifamily properties, if purchased correctly, are a great way to start and continue in the world of investing and I highly recommend it!
Katie Kinney is an Associate Broker at Landing Real Estate. She and her company represent buyer, sellers and investors in Southern Maine. For all your real estate needs contact Katie Kinney at firstname.lastname@example.org.