There are so many different areas to engage in real estate—wholesale, private lender, fix and flip—you name it. All of these offer the potential for significant financial returns, so why did I choose to become a multifamily investor?
Scalability
With multifamily real estate, developing a portfolio takes less time. Multifamily is ideal for those property investors who are looking to build a relatively large portfolio of rental units. For instance, acquiring a 20-unit apartment building is much easier and more time-efficient than buying into 20 separate single-family investment properties. Not only would you potentially have to work back and forth between 20 separate sellers, but you would also have to conduct 20 different house inspections all at separate addresses. Then you’d have to worry about the loans that each property might require. That’s a lot of work and headache that could be saved by instead purchasing one property with the same amount of units.
Easier to Finance
In nearly all cases, an apartment building will be more costly to purchase than a single-family home meant for investment. At first, it may look as though securing a loan for a single-family rental property would be much easier than securing money for a multi-million dollar complex, but the truth is that a multifamily property is more likely to be approved by a bank than the usual single-family rental property. This is because a multifamily rental property brings in a consistent cash flow from tenants every month, even if there are a handful of vacancies or a few tenants are late on rent. On the other hand, if a renter moves out of a single-family rental, then it is 100% vacant. Even if a smaller multifamily property is somewhat unoccupied, it is still less likely to be foreclosed on than a single-family rental property, which makes multifamily properties less of a risk for lenders. This reduced risk may also result in a better interest rate for you as the landlord.
Tax Breaks
There are lots of ways to generate tax flow every month and legally show a loss at tax time. Some of the tax breaks that you can take advantage of as a multifamily investor are depreciation, cost-segregation, or real estate investment tax deductions. Obviously, it is best to talk to a tax professional about what you can do in your particular situation, but with some research and the use of proper strategy, you can drastically lower your tax burden.
Increased Access to Property Management
Being a landlord is a massive deterrent for many with investing in real estate. Acting as a landlord is a time-consuming job, and so you may look to get a property manager to do the management for you. But since property managers take in a percentage of the monthly income from the rent of a given property, they can be quite expensive to contract, as well as be an added risk if the relationship doesn’t work out. As a result, investors that only own a few single-family investment homes will likely not have the luxury to hire out a property manager.
However, a property manager for a large, multifamily property may make more financial sense. Since they would take care of collecting rent payments, screening new tenants, maintaining the property, and handling evictions, they would be offering a huge service to you. And the property would produce enough revenue that it would allow you to take advantage of the property manager’s services without it cutting too far into your profit margins. Contracting a property manager as a multifamily investor would be far more advantageous to you than it would be for single-family property investments.
Cash Flow
Multifamily investment properties, by the number of units in a property, have a huge potential for positive monthly cash flow. Even with higher property taxes or a slump in the real estate market, multifamily properties generally stay in high demand, and you can expect a high occupancy rate, leading to consistent cash flow.
So why multifamily investing? Because multifamily investing is a great way to achieve the goal of freedom through passive positive cash flow. This is my goal and the goal of every real estate investor that I know, no matter their approach to investing. And these are some of the reasons that I choose to invest in multifamily real estate.
As a leading apartment investing mentor and advocate for multifamily investing, I founded the Myers Development Group to help educate people on how to start investing in multifamily real estate. Utilizing the principles of Myers Methods, you can scale your portfolio or get your first deal done and begin owning and operating multifamily real estate.