Top 10 Reasons Investors Love Multi-Family Properties

As an investor and commercial agent specializing in multi-family properties (and office leasing), I am often asked why I am so passionate about the multi-family asset type. I usually reply that I love multi-family properties because they can get you where you want to go in the shortest amount of time.

Investing in multi-family properties can be one of the fastest paths to financial independence. Only one property can exponentially exploit your wealth.

Current market conditions offer unprecedented opportunities for the savvy investor.

Here are my top 10 reasons to love multifamily investments:

#1. It’s an income-generating asset. My favorite part. Multi-family properties generate income! And it can produce significant passive income for you every month! You no longer have to worry about the source of your income if you are suddenly fired from your job.

# 2. The property pays its own expenses. Multifamily investments typically pay their own expenses. This means that all the expenses generated by the property such as mortgage, taxes, public services, payroll, advertising, landscaping, etc. everything is paid with the income that the property generates by itself. Not your pocket.

#3. You don’t have to be 100% busy to generate a sizeable income. If you own a single-family property and your resident moves out, you’ve lost your income and now must pay the mortgage and other property costs until you can find another tenant (which can take months). In a multi-family property, multiple residents can move in and you’ll still have money to pay expenses and cash flow. Multiple tenants and multiple sources of income reduce your risk

#4. Efficiencies. Most management companies know that a 10-unit complex is much easier to manage than 10 single-family homes spread across the city. Not only will you get better prices from them, but you’ll also get better prices from contractors when they know you have multiple units.

#5. Value. The value of the property is derived from a multiple of the net operating income (gross income – expenses) and not from the income generated by other multi-family properties. This means that value is easily created by increasing revenue and/or reducing expenses.

#6. High returns. – Returns of 20% or more on cash invested are not uncommon! Compare that to the 1.25% offered by savings accounts and the average rate of 2% for 2-year bank certificates of deposit and it’s obvious to the savvy investor why this asset can offer you much better returns.

#7. Not just rental income. Rental income isn’t the only income stream you can create with multi-family properties. There is also what is called “accessory” income. This is additional income that the property can generate in the form of rental fees, vending machine fees, fax fees, laundry service fees, fees paid by companies that want to provide services to their residents, and so on.

# 8. Ease for lenders. It’s easier to get a loan for a multifamily property than for other types of non-income-producing real estate assets. Lenders often rate these types of loans based on the properties’ ability to repay the debt itself and not necessarily on your own personal credit and payment history. Also, approval from a lender usually means the numbers on the property work well for everyone.

#9. Leverage. Investors can use a small amount of equity in an existing property to acquire more properties with less funds and grow their portfolio (and returns) faster.

# 10. Taxes. One year I got a $15,000 refund due to property repairs that the property paid for! Keep more personal income in your pocket through allowable deductions and depreciation.

In short, when chosen wisely, multifamily investments can add significant wealth to your investment portfolio. The current market offers unprecedented opportunities in this type of asset. Do not miss it!