Multifamily properties are houses that can be home to multiple families. A residential unit with more than one housing unit with its kitchen and bathroom is known as multifamily property, different from family homes. Most common multifamily investing involves apartments or a complex with multiple units.
Pros of multifamily investments
Consistent cash flow
Multifamily investments offer a reliable monthly income with one having many clients compared to single-family homes, which only contain just one client for the entire unit. Even with one unit in the multifamily properties being vacant, there is a guarantee that you will still get income for the rest of the units.
Easier to finance
The market value of multifamily investments is higher than single-family homes, but when it comes to investing, multifamily is the easiest. Getting financing for multifamily properties is easier since they are not risky for banks since there will be constant cash flow from the units once occupation begins. You will therefore get more money to invest in multifamily investments at a lower interest rate than getting a small amount of money at a higher interest rate.
Scalable
Multifamily investing will assist in expanding your investment portfolio compared to other rental options. This is a good start towards moving into commercial real estate and investing in more multifamily properties on a large scale.
Tax deductions
Once you invest in a multifamily real estate business, there is a possibility of reducing maintenance and operation costs which may include utilities, property management fees, repair fees and insurance premiums, among others. Being in real estate investment, in the long run, will allow you to experience real estate depreciation and cost segregation tax benefits as your building gets older.
Simplicity
While financing and purchasing units, you will need to finance each unit by itself. However, for multifamily properties, you can purchase multiple units using the same loan and have an insurance company prepare a policy.
Risks to investing in multifamily properties
Higher expense initially
Before getting to enjoy the fruits of having a lucrative investment with you, there is no denying that you will have to deal with investing a whole lot of money in the beginning. Banks are therefore willing to offer a good interest rate for loans they offer with a down payment of about twenty per cent which will depend on the size of your investment.
Competition
With the amount of return that multifamily investments offer, there tend to be more investors that tend to venture into this kind of real estate investment. With developers and property management companies starting to compete over the same buildings and land but tends to increase the prices with others buying in cash, making it difficult for some to penetrate the market.
Need more management
Even with putting together a down payment and best any kind of competition bringing hindrance to you, the most tasking bit of a multifamily property as an Investment is management. Managing different units is a huge responsibility. If you are a newbie and are interested in investing in multifamily properties, it is important to get in touch with companies like MarketSpace Capital that deal with everything from financing to management for an easier transition and growth of your investment portfolio.
Experience top-notch service with Root Realty property management in Chicago. Our commitment to excellence ensures your property investment thrives in the dynamic Chicago real estate market.