For many, investing in real estate opportunities that create passive income is an appealing way to reach their financial goals. According to the Census Bureau, there were nearly 20 million rental properties in 2018. Out of that number, 14.3 million were owned by individual investors.
If you’re just starting to build your real estate portfolio, you’ll be faced with deciding which type of rental to invest in. While investing in commercial properties may be more profitable, it requires more knowledge, experience, and resources.
For this reason, many investors opt to put their money in residential properties, which have a lower cost of entry compared to commercial. You can opt to invest in either single-family or multifamily properties. This article will explain why the latter is the superior choice.
Multifamily properties are structures that have several rentable spaces and can house two or more families. These can be anything from a duplex with two distinct units to an entire apartment complex.
On the other hand, single-family properties are buildings that only have one rentable space or house one family.
While both single-family and multifamily properties share advantages like a relatively lower cost of entry compared to commercial properties, some benefits are unique to the latter. The following are some of them:
It’s true that single-family properties usually cost far less than multifamily properties. In fact, according to Investopedia, you can acquire a one-unit rental for as low as $30,000, while multifamily properties can have price tags reaching the millions. However, when it comes to securing loans, single-family properties are at a disadvantage.
It’s more likely for lending institutions to approve a loan for multifamily rental properties because they offer a more consistent cash flow. Consider the following examples:
Lending institutions consider multifamily properties a less risky venture overall.
Property management is another critical consideration when investing in rented real estate. While you can purchase several single-family units with the amount you’d spend on one multifamily property, management will be more difficult with the former, especially if those units are in different locations.
Managing one multifamily property is easier because everything is located in one place. This makes rent collection, facilities maintenance, and other management tasks significantly less complicated.
Multifamily properties also justify the cost of hiring a third-party manager to oversee everything on your behalf. Plus One Syndications offers this service to make sure that your investment remains profitable.
It is far easier to purchase one multifamily property with 20 units compared to 20 single-family properties. Instead of working with multiple sellers, applying for several loans, or even visiting different sites, you will only need to deal with one seller, apply for one loan, and visit one site.
Multifamily properties are an excellent investment vehicle if you want to build your real estate portfolio and achieve your passive income goals. They are simply easier to acquire, manage, and grow.
If you want more information about real estate investment, call us at 206-278-4500 or visit our contact page. You can also get a feel for multifamily property investment by looking through our extensive list of investment opportunities.