In these tough economic times, people are looking for sound investment opportunities. People desire investments that are low risk but yield great returns. Unfortunately, such opportunities are hard to come by. Owning multifamily properties offers you the best of both worlds.
Here are 10 advantages of owning multifamily properties:
1. You can outsource your property management to professionals. This allows you to go on vacation.
2. You can buy with none of your own cash. It is easier to get financing on apartments than on single family homes. The more you borrow, the less they look at the borrower’s credit. You can raise private money to cover any cash requirements.
3. Apartments are made to cash flow even with nothing down, which means that there is one roof with maybe twenty apartments under it as opposed to one house with one roof. Houses are made to be bought and sold to homeowners. You can convert them to rental properties, but apartments are designed to be income-producing properties.
4. You receive better leverage of your time and effort. It is much easier to maintain a 10-unit apartment building than it is to maintain 10 single family houses.
5. The value of income properties is based on the income. It is a function of the net operating income and you can create value by raising the rents and cutting the expenses. You will then know how to invest your money and your time.
6. Less competition. There are fewer people out doing multifamily deals than single family deals because they lack specialized knowledge and the right mindset.
7. There is less risk. You have less risk from the standpoint that you have multiple tenants and multiple revenue streams. An apartment is a business. If you have a house and you lose your tenant than you are feeding the house. There is mitigated risk through apartments.
8. Non-recourse financing. The more money you borrow, the easier it is to borrow. When you get to borrowing two million dollars and above, it becomes non-recourse financing and this means the asset is the sole security for the loan. There is no one personally guaranteeing the loan.
9. Condo conversion. You can buy apartment buildings and convert them into condominiums. It is a different strategy because you are putting all of your cash forward and then pulling out. It is not a long-term hold strategy.
10. The sub prime lender bust. With sub prime mortgage lenders falling out of the market, there are people who cannot qualify for houses and foreclosures are up. This means that the demand for rentals is going up.
Buying multifamily properties allows you to have low risk and great return for your investment. If you are looking for an investment vehicle, multifamily property investing is a great way to go.