While many people think that multifamily real estate is a complicated type of investment, the reality is different. As the following guide on this type of property shows, the basics are easy to grasp, and first-time investors shouldn’t be scared off.
Location Basics
Like other types of real estate, location plays a huge role in multifamily properties, per Forbes’s DC Fawcett. Though your budget may play a large role in determining where you invest, Fawcett recommends targeting “high-yield and high-growth areas” with high demand for properties. Also pay attention to features like hospital access, school system quality, and crime rates.
Financing Basics
Because they consist of multiple units, multifamily real estate properties often carry a higher price tag when compared to otherwise similar single-family homes. However, on average, lenders are actually more likely to approve financing for multifamily property purchases. The reason is because of the lucrative, consistent nature of the cash generated by multifamily properties.
The Advantages
Multifamily real estate holds several advantages over single-family homes. For instance, consider the following:
- First-time and established investors alike can reside in one unit while leasing the others out. Â
- Vacancies are less disruptive because other, occupied units can continue to generate income.Â
- Shared amenities and features make maintenance easier. For instance, it will likely be more difficult to maintain four separate roofs of four single-family homes than one roof over a four-unit apartment building. The same goes for one yard versus four and so on.Â
- Multifamily properties are a great way to quickly build a portfolio. Just take the financing process: A single loan can often lead to the purchase of multiple units, whereas taking out numerous loans for several single-family homes will be much more laborious. Â
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