An Introduction to Multifamily Real Estate Investment

An Introduction to Multifamily Real Estate Investment

There are many reasons why people decide to invest: investing your money can allow it to grow, and you can save for your retirement, earn higher returns, and more. Consumers nowadays have a wide range of options to invest their money, and multifamily real estate investment is one of the most popular (and profitable) options.

But what exactly is multifamily real estate investing? How does it work?

Multifamily Properties: A Great Option For First-Time Investors

A multifamily property is any property that contains several housing units. Some common examples of multifamily properties are large apartment complexes and condominiums.

Investing in multifamily properties can be a great wealth-building tool and a lot less complicated than investing in office space, retail, hotels, and other asset classes. Since everyone can understand the basics of what a house or apartment must have (functioning kitchen, bathroom, bedrooms, living spaces) and the rental paperwork is straightforward, it’s a great way to get started with commercial real estate investing.

What To Look For When Investing In Multifamily Properties

Multifamily investing requires much more than browsing your local open house. Investors should conduct their due diligence – which includes locating a property below market value and commencing efforts to analyze and assess its financial sensibility. If you’ve decided to invest in a multifamily investment deal, you must consider:

  • Location: With more tenants, every unit will need to appeal to renters. Investors should look for areas where properties are strategically located and that can increase in value with some work.
  • Total Number of Units: Beginner investors often focus on duplex, triplex, and four-plex properties, but there are opportunities to invest in larger properties with a real estate partner, which can offer even more revenue.
  • Costs and Potential Income: Determining the income a property can accrue is vital. The 50 percent rule (you should spend 50 percent of the income on the expenses) is a good rule of thumb.
  • Find a Partner: Partnering is a must in multifamily investing. It can help overcome many challenges, like the lack of experience and capital.

Benefits of Multifamily Investing

Investing in multifamily properties is an immensely favorable strategy among investors because:

  • Bigger Cash Flow: A multifamily property produces multiple forms of monthly income. These investments represent an innovative opportunity to generate additional income from one investment.
  • More Control Over Value: Multifamily properties consist of more units, which means earning multiple streams of income. These investments are valued higher than single-family homes.
  • Larger Pool Of Tenants: Unlike single-family units, where income is lost when the home is vacant, multifamily properties have numerous units that can alleviate the economic loss for investors.
  • Scalability: Multifamily investments allow for the acquisition of multiple properties within one building and are perfect for those looking to grow their real estate investment portfolio.

Want To Learn More?

If you’re considering multifamily real estate investing and want to learn more before you get started, get in touch with Zephyr Equity Group