When it comes to investing, are multi-unit properties a wise choice?

Bruce Strebinger

April 28, 2022




Multi-unit properties are those that have more than one dwelling unit. Apartments, condos, duplexes, and townhouses are examples of this kind of real estate investment. Some investors even live in these flats, converting them into owner-occupied residences in the process. The down payment necessary for a multi-unit property is typically between 20 and 30 percent of the buying price of the property. While a big down payment may sound intimidating, most banks will accept this amount as a down payment provided the buyer also makes a 20 percent down payment on the property.

According to Bruce Strebinger, multi-unit homes may provide higher monthly profits in addition to being a more secure investment. Lenders are more likely to accept loans for these types of properties than they are for single-family houses. They also produce greater monthly revenue as a result of the fact that they have many dwelling units. Even if just one unit is unoccupied, the property will continue to generate money on a monthly basis. Additionally, investors may claim depreciation on their properties on an annual basis, which can result in significant tax savings.

While multi-family houses may seem to be less lucrative than single-family homes at first appearance, they may be an excellent method to diversify your investment portfolio. Several multi-family residences have a high base value and may be utilized to build a broad rental portfolio of properties. You may also use the flats to earn rental revenue by renting them out. For your renters, this will offer you with a predictable monthly cash flow flow. If you are not an expert in property management, hiring a property management business may be an excellent alternative for you to consider.

Another excellent reason to consider investing in a multi-unit property is the level of freedom it provides. Even if it’s tough to pay off your mortgage in the first year, multi-unit houses may be a reliable source of income in the long run. Additionally, there are several additional advantages to owning multiple units, such as improved cash flow, in addition to the financial advantages. Having more than one source of revenue to manage and maintain your property is advantageous. Of course, you have the option to live in a single unit if you choose.

Bruce Strebinger believes that before making the choice to invest in a multi-unit property, it is critical to do thorough market and city research on the area where you want to purchase. Make sure to do thorough study and analyze both the bad and positive aspects of the potential location before deciding whether or not the place would boost the value of your asset. In addition, it is crucial to highlight that both supply and demand have a significant influence in determining the performance of the multi-family building.

One of the most significant advantages of multifamily real estate is the low risk of vacancy. When a renter vacates a single family house, the whole property becomes unoccupied. As a consequence, the cash flow from the rental property is reduced. However, if you own a multifamily property, you will nearly always have some renters, making it a win-win scenario for both parties. You may engage a property manager to handle the day-to-day responsibilities of running your rental property.

Net Operating Income (NOI), which is the amount of cash flow that may be created by a multifamily asset after all expenditures have been paid, is an excellent approach to measure the profitability of a multifamily asset. As a result, you will have a better understanding of whether the investment is worthwhile or not. The ’50 percent rule’ may also be used to determine the net operating income (NOI) of a multifamily property. When it comes to multifamily real estate, the ’50 percent rule’ is a rule of thumb that specifies that net operating income (NOI) should be at least 50 percent greater than the mortgage payments and costs.

Bruce Strebinger disclosed, an additional criterion to take into account when analyzing a multifamily property is the capitalization rate. Using this value, you may estimate how lucrative a property will be. A higher cap rate indicates that the property is more lucrative, but it also indicates that it may require expensive modifications or repairs. An increase in the cap rate, on the other hand, indicates a decrease in both risk and return. Investing in multifamily homes may be a rewarding endeavor provided you are aware of all of the hazards and are familiar with the industry.

Whether you’re a first-time investor or a seasoned professional, multifamily buildings are an excellent way to diversify your portfolio. There are various advantages to owning a number of properties. For starters, they are less difficult to maintain than single-family residences are. As a consequence, they have more stability and are less prone to economic cycles than other countries. Renting out the other flats might also help you generate more income. Rocket Mortgage also offers mortgage pre-approval services for multifamily buildings, which you can learn more about here.