Getting into your first multifamily deal can be exciting and nerve-wracking at the same time. If you do it right, getting into good multifamily deals will allow those involved to get closer to achieving their financial goals.
For some, realizing true financial freedom, is an illusion without the right way to get there. If you are serious about obtaining more wealth without the risk and hassle of building a portfolio one single family home at a time, then multifamily is the answer. When it comes to cash flow, multifamily apartments are by far, the most lucrative way to get that stream of income that is within the reach of private investors like you.
Here are my 5 benefits of getting into your first multifamily deal:
1) Steady Cash-on-Cash Returns
Higher cash-on-cash returns compared to single family homes make multifamily a solid winner. Getting $300 of monthly cash flow on a single-family home is a good starting point for many investors, but with multifamily investors can realize multiplied cash flows. This is you are multiplying the number of units. If one deal works, why not multiply it by 50 or even 100? Even owning a single multifamily deal with 12 units will put two or three thousand in your pocket. It may not be enough for some of you to change your life, but it would certainly help cover some of your bills.
2) Plenty of Demand
In case you hadn’t noticed, the is a ton of demand for multifamily. Aside from Baby Boomers and Millennials moving to renting rather than owning, it’s less expensive to live an in an apartment than maintaining a single-family home. For investors running their properties correctly, it means high occupancy. The large cost of multifamily deals compared to single family homes are enough to keep many investors away. So this market has considerably less competition. For those that are not afraid of the numbers, they are charging ahead.
3) Low Risk
If you are familiar with how banks lend on multifamily, you know that their rates are usually low and have a high degree of flexibility and leverage. This is because they see multifamily as a low risk investment. If your single-family home goes vacant, you need to worry about having cash reserves to sustain it. If you have a mortgage on it, you are pulling that cash out of your personal reserves. The benefit of having many units in one building is that if one goes vacant, there is still cash coming in from the others to keep it running. If banks like low risk and you can leverage their money, you should take advantage of it.
4) Leverage Professional Property Management
The cash flow of a properly run multifamily deal enable you as an investor to hire professional property managers to handle maintenance, tenant concerns and problems if they arise. The incoming cash flow generated by a multifamily property allows you to use your time to source more deals or spend it on what you enjoy doing. What’s more, having a professional property manager will allow you to scale your business if you like as you can lean on their expertise.
5) It’s a Business
Many investors favor multifamily properties because of the consistently strong market and the significant return on investment. So, like any business, there are many tax benefits and ways to increase cash flow. Aside from depreciation and interest deductions, other expenses like insurance and ongoing maintenance are spread over the number of units in the deal. You can force appreciation and Net Operating Income in more ways by offering benefits to your tenants. This drives valuation up and creates value in your multifamily deal.
Anyway, this is just an outline for you to consider the benefits of multifamily properties. What do you like about multifamily deal? Let me know in the comments.