Multifamily home investing is one of the leading investments recommended by expert investors. The rental market is strong. Economic uncertainty and low housing inventory has led to fewer people buying homes.
There are a lot of reasons why multifamily home investing may be a smart choice for you.
Investing Where You Live
Investors, especially when they diversify into rental properties, worry about managing their properties. Hiring a management company is possible, but the extra overhead leads to lower profit margins.
If the property is a first-time investment, it’s often best for the investor to:
- Live in one of the units
- Rent out the other units
Residing in one of the units keeps the investor close to their investment and allows for quick responses to issues that arise. If you plan on buying a home or renting, a multifamily home allows you to secure your own home while also reducing the cost of living by renting out the other units.
Multifamily Home Investing Builds Investment Portfolios Faster
Purchasing a multifamily home, characterized by having 2 to 4 dwelling units, rapidly builds an investment portfolio. Financing is easier, especially if the units are already occupied. Investors also earn from each dwelling and reduce their risks due to the multiple dwellings.
Anyone considering adding rental properties to their investment portfolio should consider multifamily homes.
Safe Investment That Grows in Value
Rental properties are tangible items that continue to grow in value. Investors can sell these properties if they need liquidity. Since housing is always going to be in demand, rental properties are less risky than other forms of investment, such as:
Since non-vacant units will continue to generate revenue, it’s possible to pay off a mortgage while the building’s value increases. Revenue can be generated each month, with the potential to sell off the property in the future for a bigger return on investment.
Inflation Isn’t a Concern
Investments always have their own risks and concerns. Inflation can quickly cause one investment to become less profitable. With real estate, there is less of a concern with inflation because rent prices go up as prices rise.
Landlords pass on rising costs to their tenants, allowing them to maintain a steady profit margin for each building they own.
Properly managed properties are safeguarded against inflation and will have the ability to continue generating revenue for the investor.
Multifamily home investing is more expensive than owning a single property, but the ability to finance multiple units at once is a valuable asset for the investor. Low down payment rates, which can change at any time, allow investors to pay between 3% and 20% of the property’s value to make the purchase.
The only time that investing in one of these lucrative properties is not a good choice is when the investor has low credit. Lower credit scores can lead to much higher interest rates and mortgage payments, too. Higher rates will eat away at profit margins. Instead, in this scenario, it may be worthwhile to pay off other debts first and raise your credit score before investing in a multifamily property.