After gaining success, many real estate investors eventually move beyond single family rentals to more ambitious investments. They also want to add more diversity to their portfolios by buying properties with different target markets. Because of this, multifamily rentals are becoming more popular every year.
Multifamily properties are considerably different and more challenging to manage, but can be extremely lucrative. There is a strong demand for affordable housing, thanks to graduating millennials and downsizing empty nesters. Best of all, these investments are historically resilient with low vacancy rates even during economic downturns.
Easy financing is another attractive benefit of multifamily housing. HUD’s MAP approved lenders offer low fixed interest rates, generous loan sizes with small down payment requirements, and loan terms of up to 40 years. Even if you don’t have a huge amount of capital to work with, you can still invest.
Should You Add Multifamily Units to Your Portfolio?
It’s easy to see why multifamily rentals are so popular. But what if you’re still not convinced? Before making any investment, it’s important to know what sets them apart. Here are the biggest advantages.
- Cash flow – One of the most obvious reasons is that the more units a property has, the greater its cash flow. Even after expenses and mortgage payments, you can still look forward to a fairly large paycheck every month.
- Lower risk – Vacancy is the biggest killer of rental income. Single family residences are all or nothing; if they’re empty, you’re in trouble. When you have a multifamily property, though, losing one tenant isn’t as big of a deal. You maintain a more consistent income throughout the year.
- Maintenance – If you manage several properties, you should know how tiring and costly it can be to maintain them. A multifamily rental is efficient in comparison. For multiple tenants, you only have one roof to maintain, a single lawn to keep neat, and so on.
- Competition – As mentioned before, there is a relatively low supply of multifamily properties today. It’s easy to find tenants, and you won’t have to slash rates to compete with neighboring rentals.
Real estate investors can see great success with multifamily rentals. Like any other investment, though, it’s important to do your research and look for the best deals.