When Are Multi Family Homes for Rent the Best Investment Property?

Have you ever thought about what’s the best thing about real estate investing? It must be the ability to make a lot of money, right? Then, what’s the second best thing about investing in real estate? No doubt, it is the endless possibilities. The world of real estate investments is so diverse that there is something for everyone aspiring to become a real estate investor. Regardless of whether you have a ton of money or not even a penny, whether you are a real estate expert or have no real estate knowledge, whether you are a real estate professional or have never even approached this business, there is an investment option which is right for you.

For example, if you are a dynamic individual who would like to get personally involved in his/her real estate business and who likes to stay busy, then buying and owning multi family homes for rent could be the best real estate investment strategy for you. Let’s take a look at when and why multi family homes for rent are such a great investment opportunity:

Related: Single Family Homes vs. Multi Family Homes: Differences & Similarities

1. When you want low property price per housing unit

It is a common misconception in real estate investing that multi family homes for rent are a very expensive real estate investment. This is definitely the case if you look at the entire building. However, there is a very good reason for that. After all, a multi family property is comprised of not just one housing unit but of multiple housing units which can be easily rented out to several families. In general, multi family properties cost much less per housing unit than single family homes such as town houses. So, if you are looking for relatively cheap investment properties, definitely consider multi family homes for rent.

2. When you look for higher return on investment

Having said that multi family homes for rent are cheaper per housing unit, you as a real estate investor should keep in mind that these investment properties also tend to rent out for less per unit than single family homes, so your rental income per housing unit will be lower. Nonetheless, this should not discourage you from this type of investment property. Multi family investment properties are a better rental because the overall profitability is actually higher, in terms of CoC return and cap rate. The combined effect of lower property price and lower rental income per unit eventually leads to higher return on investment. Thus, by all means, think about multi family homes for rent if you want to be a profitable and successful real estate investor.

Related: What is a Good Return on Real Estate Investment?

3. When you are interested in a large real estate investment portfolio

The trick with multi family homes for rent is that you don’t invest in just a single rental property but in multiple income properties. An apartment building or a condo complex is made up of many – usually more than ten – individual housing units. This means that if you manage to purchase a multi family property, you immediately become the owner of a large real estate investment portfolio. It might not be as diverse as with multiple houses in various locations (states and cities), but it will definitely cost you less to buy and manage. So, if you want to go big in real estate investing without unnecessary complications, give multi family homes for rent a serious thought.

4. When you are interested in a real estate investing partnership

Some real estate investors like to go on their own, while others prefer to work with other real estate professionals. It all depends on your personal preferences, real estate knowledge and skills, and investment strategy. If you are one of those individuals who like to work with others, then a real estate investing partnership is just the thing for you. And multi family homes for rent are an ideal real estate investment strategy when you want to cooperate with other investors. You can share the financing, the knowhow, the investment decisions, the management, and eventually the investment risk. Meanwhile, there will be enough rental income and positive cash flow for all partners to share and be happy with their investment.

5. When you go for professional property management

Some people were made to be landlords and deal with all aspects of a rental property with an ease. Others are simply not cut for the job. No worries, even if you dread the necessity to become a landlord, manage a real estate property, and work with tenants, this doesn’t mean that real estate investing is not for you. Because of the option to hire professional property management services, any person could buy and own a rental property. These real estate professionals will take care of your income property – for a fee, of course – giving you a virtually carefree real estate investing and property management experience. If you have already decided you will use professional property management, then multi family homes for rent could be just the investment strategy for you. With this type of investment property, you will have to use professional residential property management due to the immense amount of work needed to manage the property and deal with the tenants.

6. When you look for easier financing options

It might sound crazy, but financing the purchase of multi family homes for rent is easier than of single family investment properties. Although you will need to take a larger loan, banks are more inclined to give mortgage to investors for multi family properties because the risks are lower. If you own and rent out a few residential units instead of just one, you will have some rental income even if one or more of these housing units experience vacancy. On the contrary, if you have just one unit and it is temporarily vacant, you will make no money over this period.

7. When you want to be big in real estate investing

Last but not least, you should absolutely go for multi family homes for rent if you want to be a big real estate investor. While it will take an investor in single family properties years and years to buy multiple properties, an investor in multi family properties will achieve that goal immediately.

Related: Multi Family Real Estate Investing: Debunking the Myths

While buying, owning, and managing multi family homes for rent sounds like a scary endeavor, it can be a very profitable and rewarding real estate investing opportunity if executed correctly. So think about this option if you want to be a big, successful real estate investor. For more tips and advice on real estate investments, keep following Mashvisor on daily basis.

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