Rental Revenue for Multi-Family Buildings
Rental Revenue for Multi-Family Buildings
If you are looking to get started as a landlord, then multi-family buildings are an affordable, comparatively low risk way of entering the accommodation industry. Many landlords purchase a multi-family building so that they can live in one of the spaces themselves, which makes maintenance and care of the property an awful lot easier.
One reason why multi-family buildings are so popular is that they are not, currently, building enough of them. This means that demand is at an all time high.
Real estate is a great option for growing your wealth. It does take a substantial investment to get it going, but if you have the funds, then it can work out well. There are some investors who believe that buying a house is not a good investment – because you’re paying into it each month – whereas when you buy a rental property, it’s paying you every week.
Why To Choose Multi-Family Homes?
A single house is a liability, in some ways, though – because you have just one tenant and you depend on them for your income. If they fail to pay their rent, then you could end up in serious financial trouble.
Multi-family homes, on the other hand, offer more stability. There are 75 million baby boomers that are headed into retirement and they will be looking for small properties to live in. An apartment complex that can be converted into a retirement community would make a lot of sense.
Why Renting Homes is better?
A lot of millennials are opting to not purchase homes at the moment, because of concerns about the stability of the economy and their own futures. Rather than settling down, they are more likely to look at renting a small apartment in the short term. There is a shortage of apartment units right now, and it is getting more and more expensive to build new units – so if you can buy one right now – which may require a substantial downpayment, then you will be in a secure position for the future.
Perks of investing in Multi-family Aparments
- Many lenders look more favourably on multi-family apartment units, because it is possible to make a profit on them even if you do not fill them to capacity. You can calculate the amount of money that you could make from a rental property by looking at the number of units available in it, and the average rental amount per room. Budget something for the amount that you will be spending on repairs – which will be a lot lower if you live in the unit yourself, since you don’t have to worry about travel.
- In a building that has 16 units, you could have one unit that you stay in yourself at first (until you can afford your own place closer by), and then fill 12 of the others, and still make the unit work. Fill all the other units, and you make enough of a return to cover your own mortgage, and still make money.
- Real estate investing can offer the opportunity to leverage large amounts of debt. Buy a property for 25% of the price, and you can then control up to 4x the value of your debt in property – and for the most part, bubbles excluded, the property will increase in value, and at the same time the net income will improve as well, as rent increases. There are tax benefits to holding property as well.
- It’s a good idea to look for a property with at least 16 units, smaller properties tend to carry more risk and are harder to fill. Single family residences mean that you have to be much more careful about the tenants that you attract. With multi-family real estate, if you are smart and pick your properties in the right area, you will find that you do much better in the long term.
- The trick, of course, is getting that initial downpayment. This is where many would-be landlords fall down. They feel that since it’s a smaller financial requirement to get that initial downpayment for a small house, it makes sense to buy a house straight away. For most people, though, there are better investment options for those small amounts of capital. Investing aggressively today, to build up a larger sum that you can invest in a multi-family property, is a sensible solution for people who need that little extra cash injection.
Being a landlord is always a big responsibility. Good landlords take care of their properties, and make an effort to provide people with safe accommodation that is in a good state of repair. If you cannot do this, and if you do not relish the prospect of working with tenants that may be high maintenance, then you should look at other ways of making money, because being a landlord is not going to be a satisfying occupation for you, whether you are looking at multi-family buildings or otherwise.