Benefits of Investing in Multi-family Real Estate
By Alex Capozzolo
As a real estate investor, you would want to invest in as many types of properties as you can. Most people who start out go for the single family homes first to invest in because they don’t have to worry about as much upkeep and they can purchase it directly from the owner. Many investors will say that there are some disadvantages of investing in a multi-family home but there are some perks that you can benefit from as a real estate investor. Below are a few reasons why investing in a multi-family property is a good thing.
Having a multi-family property in the right location can be a sizable location. If you purchase an apartment building or even a complex in a major city more tenants will be attracted to staying in the most convenient areas or even areas closer to downtown. As a multi-family investor, you can price the leasing rates on rent based on how close to those areas the property is. Typically, young adults or people with higher class careers will pay more to stay in a luxury or new build apartment that is closer to downtown or the heavy populated areas.
With a multi-family property investment there will always be an opportunity to receive income. Even if there is one tenant who has not turned in their rent or another tenant who may be a few days late you will still have your other tenants who are likely to turn their rent in on time. With a single-family home if the tenant doesn’t turn in their rent you lose profit which could lead down a road to bigger problems. With millennials not ready to buy a home and retirees looking to downsize there will be plenty of opportunities for loyal paying tenants.
Tenants who have been renting for a long time understand that at the start of every lease renewal there will be an increase on the rent. Many multi-family properties are offering short term lease renewals such as a six month or seven month lease which allows the property owner to increase the rent for that tenant within those months instead of a year. This is due to inflation and demands in the housing market. This will lead to a higher profit as the owner as they can change the prices at the same time that the market changes.
Less Risky Loans
With a large number of diverse tenants there is a small chance that a multi-family investor will receive a large loss in profit. When a person doesn’t pay their rent and the real-estate owner experiences rental income loss they typically have a longer period of time to retain the income or even gain another tenant. Property owners who typically keep their multi-family property in good shape, are more likely to have a constant flow of new tenants which means there is always profits coming in to make up for income loss and for any loans that have to be paid off.
Alex Capozzolo is the owner of the Brotherly Love Real Estate blog, a member of San Diego Creative Investors Association and a content writer for the real estate industry. Alex’s focus is on helping people through one of the most important investment decisions of their lifetime by seamlessly providing fast, honest, and professional real estate services.