Why is buying a multi family investment property a smart decision and where should you start looking for one?
Multi family homes are investment properties that consist of multiple residential units and house multiple tenants. These range from duplexes to entire apartment buildings! In this article, we’re focusing on why buying a multi family investment property is a smart investment decision and providing you with a list of the best places for property investors to find them – based on data from Mashvisor.
Why Buy a Multi Family Investment Property?
Higher ROI
In real estate investing, property investors make money from cash flow and appreciation. When owning a multi family investment property, the real estate investor will have a higher chance of generating a positive cash flow simply because there are more residential units, meaning more rental income.
Multi family homes appreciate at a lower rate than single family homes. However, property investors can force appreciation on multi family homes! You can do that by adding amenities such as a laundry room or a parking space, or providing extra services. With appreciation, property investors can sell their investment properties for a high price, and thus, get a high return on investment.
Easier to Finance
Even though multi family homes are expensive to purchase, they are actually easier to finance than single family homes. Thanks to positive cash flow, banks and loan lenders are more motivated to give a mortgage to a real estate investor buying a multi family investment property as they guarantee that the rental income will cover the loan payments. In addition, it’s easier to obtain one loan that covers a number of residential units than taking multiple loans to cover multiple investment properties, each with only one residential unit.
Fewer Risks
It’s very unlikely for multi family homes to get 100% vacancy rate, especially when investing in a real estate market in which demand is high and people prefer renting instead of buying a house, thus there’ll always be potential tenants for a multi family investment property. This further reduces the risk of generating negative cash flow! For example, say you’re investing in a multi family investment property with 16 residential units, and 3 of them are vacant. Of course, no real estate investor would want this, but you’ll still be able to make money and cash flow from the units that are occupied.
Related: 7 Tips to Avoid a High Rental Vacancy Rate
Where to Buy a Multi Family Investment Property
The best real estate markets to buy a multi family investment property are those with a growing population, high demand, high rental income, and low vacancy rates. Based on numbers computed by Mashvisor’s rental property calculator, the best places to buy a multi family investment property in the US housing market are Los Angeles, San Diego, Las Vegas, Phoenix, and Miami. Click here to start your search for a multi family investment property in any of these real estate markets!
For more in-depth data regarding this topic, read this: Why and Where to Buy a Multi Family Investment Property in 2018.
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