Multifamily real estate is one of many options available for property investors. This post provides an overview of multifamily properties to help you decide if they are worth adding to your portfolio.
Multifamily properties are those with multiple dwellings in a single building. Examples include large apartment buildings and smaller setups such as duplexes and certain townhomes.
According to one Business Insider article written by a successful investor, it can be easier to obtain a mortgage for a multifamily property than it is for a single-family home. The reason is that while multifamily properties can be quite expensive, they consistently generate a healthy amount of cash flow. When compared to single-family homes, lenders tend to be less worried about multifamily buildings generating enough income to repay the mortgage. Traditional banks and private lenders are both potential sources of financing.
There are many additional reasons to consider multifamily real estate. Investors can live in one unit while renting out the others, adding to this option’s attractiveness. Another advantage of this type of property is that multifamily property owners are somewhat insulated from vacancies: If a building has multiple tenants, then it can still generate income even if one unit becomes temporarily empty.
One somewhat surprising bonus of multifamily properties is that overall, they are easier to maintain, especially as a portfolio grows. For instance, if an investor owns four single-family homes, then they’ll be responsible for maintaining four roofs, four HVAC systems, and so on. If an investor owns a four-unit building, then they can draw rent from the same number of sources, but they only need to worry about keeping one roof and one HVAC system in good shape.
Though multifamily real estate can be a pricey endeavor at first, it can be an incredible gateway for new investors or a way for seasoned investors to take the next step.
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