3 Reasons Multi-Family Units are a Smart Investment

3 Reasons Multi-Family Units are a Smart Investment
Posted By @ Jan 17th 2020 11:29am

Despite the ever-changing economy, real estate investments prove time and again to be a reliable option. Ideally, you’ll make smart investments that will provide enough capital to continue growing your portfolio. When investing in real estate, you must be prepared for the long game and be vigilant in your research, but when done correctly, it can be an excellent strategy for creating ongoing income and growing wealth over time.

If you’re considering getting started with real estate investing in the new decade, consider multi-family housing for these top reasons

1) High Demand.

  • Millennials make up the country’s largest generation, and they are choosing to rent for several reasons. Rapidly increasing housing prices, especially in desirable areas and near large cities, make it nearly impossible for many young professionals to purchase a home. Millennials also prioritize experiences over material goods and the freedom to travel or make significant life changes, which makes renting appealing.

  • For different reasons, baby boomers are also favoring rentals. While much of the population over the age of 55 is in a much better spot financially than millennials to purchase property, they are choosing to cash in on the gains they’ve made on a family home and move into rental properties that offer amenities and a retirement free from yard work and repairs. 

  • Workforce housing needs are also on the rise. These types of properties often serve middle-income families and do not include many amenities. Recent research indicates that more luxury properties with higher rents have popped up, creating more demand for more simple, mid-priced rentals. 

2) Faster Rent Increases. When weighing the pros and cons of multi-family housing, consider the opportunity for quicker rent increases. With longer leases typical of retail, office and industrial space, you have fewer opportunities to increase rents. Because leases in multi-family housing units are typically just one year, you’ll have ample opportunity to keep rent increases in line with the current market and adjusted for inflation. 

3) Easier to Finance. Although securing a large loan to purchase a multi-family unit may seem daunting, securing a loan for this type of property is often very likely to be approved by a bank. Multi-family real estate consistently generates stable monthly cash flow because the building is usually mostly occupied. Even if a percentage of the units go unrented between tenants or there are tenants who are late with their rent, the majority of the units are providing income. This creates a less risky lending situation and can result in a more competitive interest rate for the investor. 

Like all investments, multi-family housing units come with risks, including changing market conditions and competition, which is why it’s essential to do your due diligence before going all in. If you want to learn more about multi-family housing or other commercial real estate investments, get in touch with us here. We can answer your questions about the Lowcountry market or get you started on a search for the perfect investment.


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