Real estate will remain a solid investment opportunity in 2022 and multifamily property will continue to lead the charts, despite the rise of economic inflation. It is also an excellent alternative for millions of people who can’t withstand the volatility of the stock market. When you invest in multifamily properties, you get to actively grow your capital rather than passively depositing your hard-earned money to a bank account that is often managed by a third party.
It is important to take a comprehensive look at investing in multifamily properties before you decide whether or not to put your money into a multifamily property. There are three key factors that help increase the demand for multifamily housing, which is why you should invest your money in multifamily properties. If you are interested in putting your money towards something that has a return on investment, then continue reading to start diversifying your investment portfolio and generate a steady income for yourself.
What Is a Multifamily Property?
A multifamily home is a residential property that has more than one housing unit to lease out to tenants. The smallest of these properties are known as duplexes, which contain two units and have a single owner, and are perfect for first-time investors looking to buy and lease multifamily properties. However, triplexes and four-plexes are also viable options for anyone looking into investing in a multifamily property. There are larger multifamily properties that come with five or more units, but these usually fall under the commercial real estate category.
Three Factors that Increase the Demand for Multifamily Housing
Multifamily housing is currently in high demand, and it is likely to stay this way. Here is an in-depth look at these three major factors driving this high demand for multifamily property:
Lack of Available Housing
Normally, buyers tend to transition out of rentals and buy their own homes. Therefore, creating room for new renters to move into a vacant multi-family home. However, the crushing demand for housing has almost made it impossible for many people to purchase a house. Most people prefer to stay put in multifamily properties, because it is an affordable alternative that still puts a roof over their heads without breaking the bank. Even with rent hikes, these tenants aren’t going anywhere. This is why many investors are betting big on multifamily rental units. Its low vacancy rate also means high monthly returns and faster scaling. After all, your tenants aren’t going anywhere any time soon, so now is the right time to invest in multifamily properties.
Increasing Need to Age in Place
Many American families are opting for multifamily housing due to the increasing need for seniors to age in place. Although seniors can modify their homes to suit their needs, they will need extra help from family to keep them safe. In such situations, a multifamily home is an excellent living alternative.
In a multifamily home, children will be able to live with parents and provide the companionship and care they need, while also having their own private space to relax and sleep. Equally, it is easier for them to take on home maintenance responsibilities, if their parents are unable to do it themselves. In most instances, children move in to help their parents with end-of-life issues out of necessity. Multifamily houses provide the perfect environment for multigenerational living, while also helping your bank account to grow.
Increasing Demand for Workforce Housing
Multifamily property for middle-income households is the backbone of workforce housing, but it can also include families earning between 60% to 120% of the median income. These properties consist of apartments that serve people priced out from more attractive and well maintained buildings.
While most people are thinking of constructing high-end properties, class C multifamily housing is the place to invest. Workforce housing is always in short demand, especially in urban settings. The simple concept of supply and demand provides long-term benefits in workforce housing investing and will help line your pockets long term.
Why Invest in Multifamily Properties
There are many options to choose from when you are deciding to invest in real estate. However, you will want to make sure that you invest your money in income-producing real estate,like multifamily properties. There are several benefits to investing in a multifamily property, such as loan opportunities and tax breaks. Here is a detailed look as to why you should invest in multifamily housing:
Increased Cash Flow
If you are looking for a steady monthly income, investing in multifamily housing is your best bet. The money is secured by a lease and comes in the form as rent from the tenants. However, the terms and conditions of the lease, signed by both the tenants and owners, lists the responsibilities of both parties and are set by federal and state regulations. Tenants can only break the lease if there is reasonable cause for them to do so. Therefore, it provides security and revenue for rental property owners.
Aside from rent, the multifamily property offers the chance for investors to offer additional residential services. For instance, you can install coin-operated laundry facilities and snack and drink vending machines around the premises of your owned properties. You can always find a third party to run these services while you collect the extra cash.
Easier to Finance
Acquiring an entire apartment building can be a rather expensive venture,. and most investors are unable to get that amount of funding for that investment. While the cost of acquiring an entire multi-family building can sometimes be in the millions, a single unit can cost as little as $40,000. However, most banks are more likely to approve funding for multi-family property. Financial institutions know that multifamily real estate will generate consistent cash flow, and having a few vacancies will not affect your loan interest. Whereas, a single-family home is 100% vacant whenever a tenant moves out and could negatively impact your loan payment.
Build Your Portfolio Faster
Investors that are looking to build a large portfolio should invest in multi-family housing. You can get a 30 unit apartment building quicker and easier than purchasing 30 separate single-family housing units, because you would not need to contact 30 sellers and conduct individual inspections for each property before buying.
You can avoid a lot of headaches by investing in a multi-family property. All you need is one loan for the entire property from a bank. Building a larger portfolio means you have financial security—even during an economic recession.
Effortless Property Management
Have you tried managing multiple single-family houses and found that it was difficult to keep up maintenance on all of them? With multifamily housing, all your properties are under one roof, making it easier for you to manage your investment.
It is also important to remember that renovation projects in multifamily homes are easier to carry out. For example, multiple units share similar features like HVAC, parking, and roads. The trick is finding an experienced property manager that can save you time and money. You get to start working on the next project, while collecting passive income.
Invest in Multifamily Property Today
Investing in multifamily housing will help safeguard your bottom line. With the current economic patterns, inflation is likely going to hit without a moment’s notice. Therefore, it is essential to start diversifying your investment portfolio with multifamily housing as soon as possible, if you are interested in buying a multifamily property.
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