Thinking about investing in real estate income producing assets? While there are many other investment options, small multi family homes are the best income generating assets for beginners.
What Is a Multi Family Home?
This is a type of real estate property that comprises two or more units within the same building. Multi family homes include a wide range of housing types including condominiums, apartment buildings, lofts, and duplexes. Some of the best high cap rate multi family real estate markets in the US include Philadelphia, Los Angeles, Atlanta, Cleveland, Miami, Hollywood, and Dallas.
Related: What Are the Best Multifamily Markets 2020 with High Cap Rate?
The Advantages of Investing in Small Multi Family Homes
Here are some of the advantages of investing in a duplex, triplex or fourplex:
More cash flow
This is one of the main reasons why beginner real estate investors should go for multi family real estate assets. Having multiple units typically means positive cash flow, especially if your investment property is in a strategic location where multi family homes have low vacancy rates. You can also easily boost your cash flow by offering extra services at a fee such as security, storage units or laundry facilities.
Affordable acquisition cost
The cost of a unit in a small multi family real estate investment is lower than that of a single family home. And when compared to larger multi family homes, duplexes, triplexes, and fourplexes are cheaper as they are smaller. Small multi family homes are therefore one of the most affordable income generating assets for beginners.
Easier to manage
It is easier to manage 4 units under one roof than it is to manage 4 different rental properties in multiple locations. When almost everything is self-contained, you can keep your operating and maintenance costs down. Having multi family homes as income generating assets for beginners also justifies hiring a property manager.
Enjoy tax breaks
When you offer residents of a city or town safe, clean, and affordable multi family housing, the government rewards you by providing tax breaks. Getting such tax breaks means earning more revenue from your rental properties. To make the most of deductions from the government, consult an experienced CPA (certified public accountant) in your area.
High appreciation rate
The appreciation rate of small multi family homes is usually higher than that of other types of real estate property. However, this does not just happen automatically. You must continually maintain your investment properties to ensure that they increase in value over time.
Rarely completely vacant
When it comes to rental properties, it is inevitable that tenants will move and create vacancies. The great thing about multi family homes as income generating assets for beginners is that they are rarely completely vacant. As a result, there is always some money flowing in. This is not the case with single family properties which can remain vacant for a long time.
You can live in one of the units
The ability to reside in one of the units (house hacking) is a major benefit, especially for beginner real estate investors. This helps keep your expenses down and boosts your revenues. And you can also qualify for an FHA loan for an investment property with a low down payment (as low as 3.5%). So beginners without a lot of money can use this real estate investment strategy to break into the housing market.
Related: What Is a Duplex? A Complete Guide for Investors
How to Find Multi Family Homes for Sale
Now that you’re aware of what you stand to gain from this type of real estate investment, you’re probably wondering “How can I find small multi family homes for sale near me?”
You can find multi family homes for sale by driving around neighborhoods, checking magazine and newspaper ads, hiring a real estate agent, searching online listings or attending open houses. However, the most effective method of finding triplexes, fourplexes or duplexes for sale is through Mashvisor. With the click of a button, you can quickly find and analyze the best income generating assets for beginners in different cities and towns in the US.
To start your 7-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
You can use any of these Mashvisor tools to find multi family homes in your location of interest:
Heatmap Analysis Tool
The heatmap tool uses visual and color cues to show the neighorhoods with the best investment properties for sale in an area. Different colors (red, yellow, and green) are used to represent various metrics and percentages.
First, you can use the multi family property search filter to ensure you only see this type of listing:
Mashvisor’s Multi Family Property Search Filter
Then select the heatmap filters (occupancy rate, cash on cash return, rental income, and listing price) to see which neighborhoods perform well for each metric. For example, a neighborhood with affordable multi family homes for sale will be highlighted in red when the Listing Price filter is selected. One with multi family real estate with high cash on cash return will be highlighted in green when that filter is selected.
Mashvisor’s Heatmap Analysis Tool
Once you’ve done a heatmap analysis, you can then click on the available multi family listings and use the investment property calculator to figure out which is the best investment property. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Property Finder
This tool uses predictive analytics to help you find the most profitable Airbnb or traditional rental properties within minutes. The property finder tool also helps you locate properties that match your investment goals in terms of return on investment, property type, optimal rental strategy, and listing price. Its AI feature allows you to search multiple cities at once, thus saving you the time of looking for properties in individual cities.
Mashvisor’s Property Finder
Related: Rental Property Finder: A Revolutionary Tool for Investing in Real Estate
The Mashvisor Property Marketplace
Mashvisor’s Property Marketplace is the best place for finding and analyzing off-market properties such as bank-owned homes, short sale properties, foreclosed homes, and auctioned homes. You can assess the investment potential of a property using metrics such as monthly expenses, cash on cash return, cash flow, cap rate, and occupancy rate. Filters such as location, miles, budget, number of bathrooms and bedrooms, and listing type allow you to narrow down your investment property search even further.
Visit the Mashvisor Property Marketplace now.
Related: 5 Best Real Estate Investment Tools for 2020
Conclusion
When it comes to real estate investing for beginners, multi family homes are the way to go. And if you have little or no experience in multi family investing, it would be advisable to start small with a building of 2 to 4 units. This kind of investment property would be easier to finance and easier to manage. If everything goes well, you can later invest in larger multi family homes.
To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.
