For many beginners to real estate investment, buying single-family homes and condos seems like the best method of investing their money. In most cases, this is because it’s the type of real estate that the person knows and understands. Many people think that multifamily properties seem confusing and overwhelming, but the truth is that with the right team and information, investing in multifamily properties is as easy as single-family properties.
Multifamily properties can (and often do) generate more cashflow than a single-family home. Whether it’s a duplex, a triplex, a fourplex, eight-plex, or any size apartment building, you can earn exponential cashflow if you do your deals the right way.
Obviously, cashflow is a great reason to get into investing in real estate. Increased cashflow is only one reason to invest in multifamily properties. Here are four more:
- Management is Easier
Whether you are managing your real estate investments yourself, or hiring a property management team to do it for you, what do you think will be easier – k several homes located across a neighbourhood, or city, or all the units under one roof? With properties in different locations, the time it takes to manage the properties is increased, and you may even need more than one property management company depending on where they service. Reducing the locations means less time spent managing and less money spent doing it. Thus, it’s easier and cheaper, so you have a better income in the end.
- Appreciation in Multifamily Properties is Greater Compared to Single-Family Housing
Appreciation happens in two ways, via inflation and by improving a property. A property rarely just appreciates by itself, and letting it sit and doing nothing can actually cause it to depreciate, or go down in value. For rental properties, there are specific things that force the value of a property up, like adding amenities and benefits for tenants.
There is only so much that can be done with a single-family home, such as improving it cosmetically, or doing a full reno to increase value, but at the end of the day, it’s just one property.
With multi-family properties, you can improve curb appeal and renovate the units, like with a single-family home. You can also add amenities like a laundry room, or storage room. In turn, the value of the property will increase from rent increases and any other income that is generated by the additions. Also, you can create a steadier cashflow as you will attract tenants who want to stay.
- Add Further Cashflow
As mentioned in the previous point, you can earn income in addition to the rent paid by your tenants. Laundry rooms with coin-operated machines, vending machines and storage and parking are all examples of ways to generate further income in multifamily properties.
This doesn’t really work for single-family homes, as laundry facilities and parking, amongst others, are usually expected by the tenants.
- There Are Great Tax Breaks that Come with Investing in Multifamily Properties
There are plenty of tax incentives available to those that own and run multifamily properties. This is a business, so you can use a lot of your expenses as deductions when it comes to tax time. Also, many cities give incentives to landlords, since they are providing housing within the city. You can also benefit from depreciation of many items within the property.
What is important is that you add an accountant to your team. She should understand the ins and outs of taxes and tax benefits to real estate investors. The goal should be to help you get as many deductions as possible. The money you save will more than pay for her invaluable advice.