How to Become Financially Independent with Multi-Family Units
Grow wealth and gain community goodwill by investing in multifamily properties. If you’re seeking a financial investment to build wealth, real estate continues to be a solid investment. Multifamily properties grow wealth more quickly than single-family homes, and with the current affordable housing shortage, rental properties are in high demand.
Two of the largest generations in history are renting more frequently. Aging baby boomers are downsizing and millennials are renting for longer periods of time. These factors lower your risk of vacancies and highlight the need for more housing options, making multifamily properties a smart real estate investment.
The Benefits of Investing in a Multi-Family Property
Consider the reasons to invest in a multifamily unit below, as outlined by real estate investing mentor Laura Alamery.
Higher Income with Strong Monthly Cash Flow
Multifamily properties produce more income faster than single-family rental homes. The risk is higher with a single-family home where you are dependent on one renter. If that renter decides to vacate, you are left with an empty property. However, with multifamily properties, you have multiple residents. Even with a few vacancies, you are still earning income each month from other residents.
Additionally, the per-unit cost is lower for multifamily units versus single-family homes. Even though the total mortgage is likely higher for the multifamily property, monthly income is more predictable and produces higher monthly revenues. The strong monthly cash flow means you make more money annually than with a single-family property. As such, investing in this real estate can be a smarter long-term option.
Plus, the cash flow can be used to cover the mortgage, monthly operational expenses, or it can be re-invested in property improvements. Net Operating Income (NOI) is the total revenue collected minus all operational costs. NOI for multifamily properties vary based on property age and location with urban areas and newer properties having higher monthly operating costs. However, for newer and urban properties rental rates also tend to be higher.
Hire a Property Manager
The prospect of operating a multifamily property may feel overwhelming as compared to renting out a single-family home; however, because multifamily properties produce more income, it is more affordable to hire a property manager. A property manager handles the day-to-day operations like finding residents, collecting rents, and maintaining the property. This takes the burden of managing property operations away from the property owner.
Property managers are most often paid based on a percentage of monthly income the property produces. They’re incentivized to operate a well-maintained, low vacancy, quality property in order to drive monthly income.
To learn more about hiring a property manager and other real estate investing mentor tips, consider real estate coaching. There’s no better way to mitigate risk than to know what you’re doing and to have a sounding board while you do it.
Opportunity for Growth and Community Improvement
Investing in existing multifamily properties, especially in developing communities, creates an opportunity for growth. NOI is higher for properties older than five years. This is primarily due to lower tax rates; however, capital expenses for older properties increase over time.
Investing in property improvements increases income. Transforming a multifamily property with upgrades like unit remodels, sustainable property features, and added amenities makes the property more desirable and attracts residents able to afford higher monthly rental rates. When you purchase a multifamily property and invest in improving the property, you add value to your community by providing a quality rental option to help meet the demand for affordable housing.
Grow Your Wealth with Multifamily Property Investment
If you are seeking real estate investment opportunities to grow monthly income and long-term wealth, multifamily property investments are a solid bet. Multifamily properties produce more annual income than single-family homes and add value to the community. The benefit for you, as the investor, is both financial and goodwill-based. Be a leader in your community by investing in multifamily properties.
As you get more serious about real estate investing, be sure to seek the help of a real estate investing mentor today!