Multi-family home prices mortgage costs are subject to the rise and fall of real estate markets. Yet regular increases merely keep pace with the economy, posing no real threat to your investment plan, and not providing a strong enough reason to curtail your commercial real estate investment opportunities.
In times of rising residential home prices, multi-family real estate will offer the greater return on investment (ROI). Multi-family capital costs do not tend to keep step with inflation, but stay well back from the drastic ups and downs of residential listings, while enjoying higher returns.
For the person that is in their forties or fifties, it would be prudent to look at duplexes when considering a multi-family property investment. Take some time to examine the cost per dollar ratio of each of your options. The cost difference between the duplex and a small apartment building is somewhat negligible when compared with the income streams each property will bring in.
5 Multi-Family Facts For Investors
- Multi-Family Means Healthier Rates – A desirable capitalization or cap rate is the single most important factor in gauging the investment worthiness of any rental property. Cap rates calculate a property’s true net operating income then divide by its price. Properties with higher cap rates are generally more desirable investments.
- The ROI Also Rises – A multi-family property’s Return on Investment will almost always come out ahead of a single-family dwelling’s for the simple reason that your cost of service will always be lower divided among additional units than when hung like a yoke upon one door. All of your costs will be lower per unit in a multi-tenant situation compared to a single-family dwelling.
- Multi-Family Equals Multi-Profits – Becoming more prized as the cash cow we all want at pasture, rolling in green, multi-family housing can provide a steady income stream that keeps cash flow ahead of and well above costs, allowing the investor to reap financial benefits by allocating profits. Five or more units is often where investors comfortably cover their margins.
- Numerous Income Streams – Rental rates depend on supply-and-demand, rising with populations, and at a faster trajectory than associated costs. A steady market for your units is a hedge against inflation and keeps your cash flow streaming in. When any cost rises, any multi-family rental is better equipped to absorb an added expense due to multiple income streams.
- Maintenance by the Numbers – While less is generally more, when it comes to maintenance, more units mean less maintenance cost per door. Contract repair and maintenance work out to a well-reviewed property management company that provides references. This could be at the outset of your career as a future land baron, or decades in.