Real estate is a solid and reliable investment. If you are just getting started as a real estate investor, should you purchase single-family homes or multi-family apartment complexes? Read on to find out the advantages of multi-family real estate.
Easier To Get a Loan
It might sound counter-intuitive since multi-family real estate is so much more expensive than a single-family home would be, but it is actually easier to get a loan to finance an apartment complex. With a multi-family property, you will always have cash flow every month. You might have some vacancies, but you will still have a lot of tenants paying rent. If you are renting out a single-family home and your tenant leaves, your vacancy rate is 100% until you find another tenant. So, some months you might have to pay the mortgage on the house but have no money coming in. Because of this, lenders view multi-family complexes as a less risky investment than a single-family property.
Ability To Hire a Manager
If you own an apartment complex, it may make sense to hire a management company to take care of the daily tasks of running the business. Property managers can relieve you of the tedious work of finding tenants, checking their backgrounds and credit reports, performing maintenance and handling tenants who don’t pay their rent. Since the apartment complex produces a large amount of rent every month, hiring a property manager will not be such a big chunk out of your profits. However, with single-family homes, it is not really cost-efficient to hire a manager until you have a lot of properties for them to manage.
Quicker To Grow Your Portfolio
If you purchase a 30-unit apartment building, you already have a good portfolio of rental units. Just think of how much time and effort it would take to purchase 30 individual single-family homes. You have to search for a suitable property, get an inspection and apply for a loan for each of the properties separately. Yes, a single-family home usually brings in more rent than one apartment, but it surely will not bring in as much rent as a whole apartment building.
There are many strategies for earning money by investing in real estate. As the above considerations show, investing in multi-family real estate is an excellent way to grow an investment portfolio. You can even hire a manager to take care of a lot of the work, freeing you up to look for more investments.