Posted over 6 years ago

Could Investing in Multi-Family Property Increase Your Income?

The concept of a multi-family property isn’t exactly new. In technical terms, a structure with more than two separate living units counts as a multi-family property. Over the years these types of homes have propelled a shift in culture in the country for both homeowners and property investors. A recent report by JLL showed how multi family home starts were far outpacing the single family houses being constructed in the U.S. since the financial crisis.

But why are these types of properties in favor and how does it make financial sense to buy multiple homes rather than a single unit? Here’s what you need to know:

Easy entry

Like other investments, a certain amount of cash is needed to get things rolling. But with a property you could start on the investment ladder with the one you live in. Find one online, get an online conveyancing quote and settle the price to get started. But in a single unit you won’t have a regular flow of cash. This isn’t a big concern if you’re a multimillionaire with a well-diversified portfolio, but for the rest of us the extra cash comes in handy while paying the mortgage off.

State and federal regulators understand this and have made it remarkably simple for people to purchase multifamily properties that are ‘owner-occupied’, with little to no down payment. Even the qualification guidelines for mortgages are less stringent.

easy_entry

Accelerate Wealth Building

Maintenance is the most crucial outflow when investing in property, and the good news here is that there are minor differences in maintaining a single unit as compared to a multifamily one. If you do most of the work yourself, it could allow you to save money on the investment that could eventually be used to compound your wealth. The best thing about multi-family units is that you can renovate certain parts or units when they are unoccupied while still earning cash from the ones that are occupied. If you plan it well in advance, it’s a very efficient system.

Cash Flow Positive

Well-chosen multi-family properties can be very attractive long-term investments since they get cash flow positive so soon. Operating costs, as discussed before, are reduced and this allows the owner to manage a property that throws off substantial amounts of cash every month. Plus, the more the units you own, the more diversified your holding. So a few families leaving at a time will cut into your earnings, but not by that much. Choose an area where the rent yield is high and the vacancy rates are low and you’ll be set. cash_flow

Some things you should know:

Like other property investments, multi-family units are very ‘hands-on’ and you will either need to hire someone to look after the property or do it all yourself.
Hiring a professional management firm is great if you need some assistance, but these services don’t come cheap and even if you can afford them, they will reduce your long term capital gains.