Investing in Multi-family Real Estate
When looking at all of the various investment vehicles in today’s financial world, many investors prefer investing in Multifamily Properties, especially those who are looking for an additional source of passive income every month.
Investors who look for slow and steady capital appreciation in the equity value of their portfolio, as well as recurring monthly cash flow, mostly opt for this investment strategy.
When compared with investments in other residential properties such as single family houses, duplexes, four-plex, etc., multi-family properties are generally easier to finance, compound returns and profits more quickly given the sheer economies of scale.
Multi Family Homes VS Other Properties
When it comes to residential real estate, there are two main types of properties that one can invest in single-family (including duplex, four-plex, etc.) and multifamily. Both single family and multi-family are popular ways to invest in real estate by owning a collection of rental properties.
Although, the properties that only have one residential rental unit are commonly referred to as single-family properties, while apartments or the complexes that have multiple rental units are known as multi-family properties.
It is pretty good to be a landlord. Apartment vacancies and interest rates have remained low over the years and are still expected to remain low over the coming years. Mortgage bankers are not the only professionals to benefit from multifamily housing. According to a survey by the National Real Estate Investor, multifamily real estate was ranked as the most attractive type of commercial real estate investment, and so do we.
Benefits of Investing in Multifamily Property
Generally speaking, there are fewer regulatory and zoning hurdles when building a portfolio of small homes, when compared with multi-family. However, the additional effort for multi-family can definitely pay off as there are numerous advantages to capitalizing and investing in larger, multi-family residential communities. Some of them are:
In most cases, the cost of acquiring an apartment complex will be higher than the cost of purchasing a single-family home as an investment. Consequently, it might appear that securing a loan for a single-family property would be easier and more relaxed on the underwriting, but the truth is the opposite. A multi-family property is more likely to be accepted by a bank for a loan than a single property, because it takes a bank underwriter the same amount of time to perform their due diligence on a larger, multi-family loan as it does for a single-family purchase. Additionally, the multi-family real estate asset is expected to generate a larger cash flow every month, in which to serve the debt. This makes it a less risky investment for lending institutions.
Multi-family properties have become a suitable choice for property investors who demand to accumulate a relatively large portfolio of rental units. Acquiring a large number of apartment units (say 20) is quicker and more time-efficient than buying 20 different single-family homes. As in the latter case, one will need to work with 20 different sellers and conduct inquiries on 20 houses that might be located at a different address. All of this overwhelming tasks can be avoided by acquiring one multi-family property purchase of 20-units.
A property manager is normally paid a percentage of the monthly income that a property generates for performing the duties like, finding and screening tenants, collecting rent payments, paying bills, preparing financial and property reports, handling evictions and maintaining the property.
Many investors who own small properties or single-family homes do not have the ability of contracting an external manager as it would not be a financially viable decision due to their small portfolio.
The amount of money that multi-family properties yield each month give their owners a portfolio of cash flow to pay for the much needed professional property management services that are generally not available in a single-family investment.
Tips About Investing in Multifamily Homes
Although the MarketSpace Capital Due Diligence checklist is rather lengthy, the following checklist should be used by those who are looking to invest in a multifamily investment property:
MarketSpace Capital is available to assist you every step of the way in our goal of maximizing the returns and minimizing the risk in your investment.
Facts About Multifamily Real Estate Investing
We will discuss reasons why multifamily assets will continue to be attractive in the coming years.
Banks provide more debt capital for apartments, allowing them to get approved for mortgage loans than other property types quickly. Mortgage Bankers Association annual report indicates that in 2018 multifamily bank lending increased to $ 100 billion. Government-sponsored enterprises, Freddie Mac and Fannie Mac, have provided a liquid loan market encouraging easy buying and selling of multifamily housing.
Multifamily housing has a significant advantage from the lenders’ side since its rental income comes from a wide range of tenants making multifamily investment lending a lower-risk proposition.
- The cash flow of multifamily projects over the 5years, according to the NCREIF Property Index, is 8.58%, a desirable rate for a dividend stock. Most investors will aim for above-average returns like we do at MarketSpace Capital.
Despite the economy’s state, people will always need a roof over their heads, and multifamily housing has been regarded the best according to tenants’ demand. The Federal Reserve Bank of St. Louis report that homeownership dropped in the 1970s and 1980s in the United States.
Multifamily housing developers have given families more reasons to consider multifamily real estate since apartment construction is quality. Buildings are made more sustainably with a focus on green space and entertainment options. Designs provide a modern lifestyle, joining technology with service orientation adjusted to the customer experience.
Demand is strong for older Class C and Class B multifamily housing, such as our first Orlando, Florida investment. Owners look for private equity real estate partners to offer capital for value- add renovations. These buildings are a profitable investment since they are efficiently managed without significant renovations. Communities offer subsidies to owners who house median-income tenants like the police or teachers.
Property enhancements and capital improvements can have immediate payback, for they can command higher rents. For example, tenants will be willing to pay more if they are provided with something they value, like in–unit smart home technologies such as Nest cameras, thermostats, and package locker systems.
The advantages above are fundamental and essential to a multifamily property.
At MarketSpace Capital, we offer additional strategies to ensure our multifamily buildings are a better way for a real estate investment.
Invest in Multifamily Homes Around the Nation with MarketSpace Capital – Located in Texas
MarketSpace Capital, located in Houston, Texas, develops best-in-class multifamily projects in some of the most attractive real estate markets in the United States.
MarketSpace and its senior leadership team are available to provide answers to the questions arising from many first time real estate investors such as “How do I make money on real estate?” MarketSpace Capital is there to help the investors in understanding the concepts of Cash on Cash Return, Internal Rate of Return, Equity Appreciation, Principal Pay Down, etc.
MarketSpace capitl also assist an investor in understanding the unique tax and estate planning benefits that multifamily investing can provide. Simply put, MarketSpace Capital is there to provide friendly guidance and help throughout the process of investing in a multi-family property.
MarketSpace Capital is a private equity firm located in Texas that specialized in multifamily home and commercial real estate investing.