When talking about investing in residential real estate, you have two primary property types to consider — multifamily and single-family properties. A single-family property is a residential building that only has one unit you can rent out, while a multifamily property, typically known as an apartment complex, is a building that has multiple units you can rent out. Although there are fewer difficulties involved in creating a portfolio of single-family properties, investing in bigger residential complexes offer plenty of significant benefits.
Acquiring a Multifamily Property Might be More Costly, but it’s Actually Easier to Finance
Admittedly, purchasing an apartment complex will be more costly than purchasing a single-family property. For example, you could buy a single-family unit with say, $35,000, while you would need hundreds of thousands or even millions to purchase on multifamily property.
While it may seem like getting a loan to buy a single-family unit will be a whole lot easier than getting approved for a loan to fund the purchase of an apartment building, in reality, lenders may be more willing to approve a loan to fund a multifamily property. The reason for this is that multifamily properties can generate a solid and consistent cash flow each month, and this applies even if some units are vacant or some of the tenants are behind on their payments.
You Can Grow Your Portfolio Faster
Investing in a 15-unit apartment complex is simply more time-efficient and less complicated than investing in 15 different single-family properties. When investing in multiple single-family properties, you would have to go and forth with 15 different sellers or real estate brokers and inspect 15 different homes in different addresses.
In addition, you would have to apply to for 15 separate loans for every one of the single-family properties you want to purchase. You could easily avoid all the stress and headaches by working with one seller and working with one multifamily lender to purchase one multifamily property with 15 units.
You Won’t Need to Worry About Property Management
Plenty of real estate investors — and this probably applies to you as well if you’re considering investing in a multifamily property — don’t want to concern themselves with the maintenance and daily upkeep of their real estate investments.
Instead, they hire property managers to look after their properties for them. In general, people who own single-family properties don’t have the means to hire a property manager just to manage one or two properties because it’s simply not a rational financial decision. On the other hand, the amount of money you could generate every month with a multifamily property will give you the means to hire a property manager without having to significantly reduce your margins each month.
Similar to stocks, investing in real estate will give you the chance to succeed through many different investment strategies, one of which is through building a portfolio with multifamily properties due to the benefits that it can offer. These benefits include better and easier funding opportunities, hiring someone to manage your investment, and growing your portfolio faster than if you were to invest in multiple single-family properties.