If you are considering investing in real estate, one of the best options available to you will be multi-family apartment buildings. There are a variety of different benefits you will gain, as you will see below. If you have been on the fence about investing into commercial real estate, the benefits below should help to convince you.
1) The Cash Flow Will Be Stable
When you are making an investment in a piece of property that you want to turn a profit for you, few options are as good as multi-family apartment buildings. People are always going to need to have a place to live, and with the housing inventory being low, most will turn to apartments. This means that you will have a low vacancy rate, and when people move out, it will be relatively easy to have new tenants come in quickly. Because it’s commercial real estate, it will be difficult to be disrupted by technology, as you may see with some other types of investments.
When you invest in multi-family apartment buildings, it has the potential to provide you with solid income now and in the future. In fact, you could end up making even more from these types of properties if you invest into amenities, such as a laundry room in the complex. The cost of the machines will be covered quickly, and it all starts to become more profit after that.
2) Great for Long-Term Appreciation
These types of buildings are fantastic for those who want to buy and own them over the course of many years. This is because they are built for long-term appreciation. The cost of living changes, the cost of rent rises, and the properties continue to gain more value over time. This is precious real estate and the buildings – as long as they are properly maintained – are not likely to lose value over the years. It tends to be a fantastic way for you to hedge against inflation.
3) Tax Benefits
Of course, when you own property, there are also tax benefits that go along with them. You can depreciate many parts of an apartment building, and the depreciation benefits that you receive can last for decades in many cases. There are a number of potential tax incentives that can be used, but you will want to work with a CPA who knows and understands these tax laws to ensure that you enjoy all of the tax breaks allowed, and that you are following the law.
Related: Available commercial properties currently in the market.
4) Power of Leverage
When you are considering investing in multi-family housing, the banks will often see this as more of a business than just a casual investment property. You will find that it often becomes easier to work with banks when you are putting your money into one of these types of buildings than it might be with other sorts of property. This is because the banks see the same types of benefits that have been mentioned earlier. There will always be people who need to have a place to live.
Even though these buildings are larger and they may be far more expensive than buying a single-family property, they tend to be easier to finance. While it might seem out of reach to get a loan for a property like this, the banks are going to look at the potential cash flow of the property when they are making their decision. Just because you don’t think that you could get a loan that large does not mean it is out of the realm of possibility.
For example, if you were trying to borrow money for a single-family property, whenever that property is unoccupied, it is considered 100% vacant, and you are making no money from it. However, if you were to have a building that had 10 units in it, and one of the units was not occupied, this would only be a 10% vacancy. This means that the banks see the likelihood of a foreclosure on an apartment building as far less likely than that of a single-family property being used as a rental.
5) Ability to Borrow Against the Property or Use It as Collateral for Other Investments
Once you own a multi-family apartment building, it is possible to use that building and borrow against the property, so that you can then purchase other investment properties. Banks have already seen that you can keep up with payments, and they are more likely to be willing to continue lending to you. This allows people to grow their portfolios, and their wealth, far more quickly than they could if they had just focused on buying and renting out single-family homes for their investments.
Imagine how much your cash flow could be if you had several apartment buildings throughout the city. Your portfolio grows quickly, and so does your bank account.
6) Easier to Manage Using Property Management Companies
Those who might be thinking about this type of investment might also be thinking that it would simply take too much time, money, and energy for them to be able to manage effectively. Even if there are just a couple of units, it might not be feasible for just one or two people to handle the management aspects of it. Fortunately, investors do not have to handle any of this on their own.
Instead, they will typically work with a property management company that is able to take care of all of the needs of the property from the maintenance to the landscaping, parking lots, rent collection, dealing with tenants, finding tenants, and everything in between. Even though it might cost to work with a property management company, investors consider them worth every penny.
As you can see, there are some very good reasons that you might want to consider choosing a multi-family apartment building when you are looking for quality investment properties. They have a substantial amount of potential, and they could be easier to buy than you might have previously thought.
Commercial real estate may seem intimidating at first but it is one of the best investment vehicles available. Donald La, licensed commercial real estate broker, is an expert in all types of commercial property investments with years of experience servicing San Gabriel Valley and Los Angeles County. Contact Donald if you’d like to sell your commercial property or were interested in buying one.
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