Real estate is an extremely lucrative industry. If you are an investor, it’s best to find homes that will bring in the highest ROI. Experts will tell you that multi-family homes are a smart choice when looking for investment homes for sale.
Multi-family homes are a good choice because they are easier to finance, they help you grow a diverse real estate portfolio, and they put you in a good position for hiring property management. Read on to find out why you should be making a multi-family home your next investment.
What are Multi-Family Homes?
Multi-family homes refer to any type of residential property with units for one or more families. Examples include homes with multiple units, apartments, condos, and some townhouses.
Why Do Multi-Family Homes Make Great Investment Homes?
They Generate More Income
A multi-family home generates more income than a single-family home making it a better prospect when searching for investment houses for sale.
Let’s say you own a single-family home, and the family moves out. The home is then 100% vacant and generating no income.
Now, compare that to a ten-unit property. If one of the tenants moves out, the property is still 90% occupied. It is generating 90% of its income potential making it a great investment choice.
They are Easier to Finance
You might think that multi-family homes would be harder to finance than single-family properties because they are more expensive. But they are easier to finance because lenders know they make great investments. They realize that multi-family homes have more potential to generate income, so they are more likely to fund these loans.
They are Less Time-Consuming Investments
It’s in a real estate investor’s best interest to generate as much income as possible. They can do this by investing in multiple properties. But this is a time-consuming process. The investor will need to scout out several investment homes for sale, go through the negotiating and closing process, and maintain each property individually.
If the investor invests in a multi-family home, they will deal with just one seller and one property location. This allows them to get more bang for their buck when it comes to potential earnings.
They Build a Diverse Real Estate Portfolio
A diverse portfolio is beneficial for any investor. When you own various assets with different performance results, you reduce your risks and improve potential earnings.
Owning a multi-family home allows you to diversify your portfolio if you already own other types of investments.
They Put You in a Good Position to Hire Property Management
Many investors would rather not deal with property management. Taking care of maintenance and repairs can be time-consuming. And handling collections and evictions can be downright unpleasant.
Owners will often hire property management teams to take care of these responsibilities, but doing so eats into profits. If you own a single-family home, it will barely be worth it. But if you own a multi-family home, you will be making enough to cover property management and still have some left over.
Other Things to Consider When Looking at Investment Houses for Sale
Here are some other things to consider when looking at investment homes for sale:
- Location: It’s important to purchase a home in a good neighborhood. If the neighborhood is unsafe, or if it is far from schools and businesses, you will have a hard time renting it out.
- Condition: Some investors like to invest in homes you can flip, but the repairs must be affordable to ensure you make money on your investment.
- The Real Estate Market: You must also consider the real estate market of the area you are looking to invest in. Is it a seller’s market or a buyer’s market? Is it an up-and-coming area or are prices likely to stabilize over time? These factors will help guide your purchasing decision.
Multi-family homes are an especially lucrative real estate investment. They generate a fair amount of income, they are easy to finance, and they make property management affordable.
