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Why Multi-Family Real Estate is a Good Investment

By: Sam Zherka

Real estate investment has changed throughout the decades for the increasing demand changes that each generation poses. Buying a single-family home just doesn’t provide the same return on investment that it used to. If you prefer the long-route and waiting game then purchasing a single-family house may be the investment route you want to take. The fact of the matter is, that the real estate market will always fluctuate with the current economy and in many cases, you may not have the return on investment for a single-family home that you once thought.

That is where multi-family real estate properties are the best investment. Multi-family real estate is typically considered to include all buildings containing at least two property units, which are adjacent vertically or horizontally. Currently, these properties equate for 25% of the U.S. commercial real estate stock, which is the second largest share of institutional investors.

Like the reasons stated above about single-family homes, multi-family properties offer a higher return on investment in a smaller amount of time. While they are more expensive up front, they are easier to finance in the long run. With multi-family properties, you will be earning a monthly income from the renters that are living in your units.

The changing of generations is another reason why multi-family real estate is a better investment for this market. Millennials are not buying homes like their parent’s generation before them. At least not as quickly. Millennials are known to get married later in life than their parent’s generation as well as settle down in one area at a later time. This causes them to rent more properties for longer periods of time before they buy their homes for their families. The baby boomer generation is also headed into retirement. This poses a great opportunity for multi-family investors, as many multi-family properties are set to be able to renovate into retirement home facilities.

Another plus of investing in multi-family real estate is being able to expand your portfolio. Once you have the understanding of how to run one multi-family property it will make the process of owning and renting out more multi-family properties even easier.

Then enters the property management tactic. As you begin to increase your portfolio, it may start taking too much of your time up to shift through all the details of each and every tenant. Hiring a property management company to handle your daily routines will ease up on your time dedicated to managing the properties and can help you gain more time to look into other investments. Often property management companies will take a percentage of the monthly rental value of the property, usually between 3-6%. This may seem like a daunting number, but as your portfolio expands, it is important to weigh the value of your free time into the equation.

Overall, multi-family real estate investing has been seen to be the best option for real estate investing in the current market.

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