Pros of Investing in Multi-Family Properties


Investing in rental properties is a proven lucrative way to generate passive income and diversify your portfolio. However, there is limited availability of high-quality, single-family homes and condos for purchase, and this limited supply means higher prices and higher demand. 

For this reason, investing in multifamily real estate becomes a good alternative for those who want to diversify their portfolios or have limited funds to invest. There are many advantages to investing in rental properties, from capital appreciation and tax benefits to personal satisfaction from owning your own business and future opportunity as a landlord. 

In this blog post, we shall explore the top pros of multifamily housing investment – 8 reasons why you should!

Better Returns on Investments

There are many investment strategies, but the one that consistently outperforms all others is investing in rental properties, especially multifamily apartment investing. With such high demand for properties that make up the rental market, investing in rental properties will result in a higher rate of return than other types of investment, including stocks, bonds, funds and insurance products. 

The S&P 500 has had an average return of 6.2% over the last ten years, while the average return of investing in houses and condos through REITs has been 8.8%. Some of the factors that contribute to the higher returns on investing in multifamily real estate include the fact that the value of such properties depends on how well they are maintained, insurance rates are often lower than other investable assets, and property taxes can vary significantly from building to building.

Easy to Qualify Properties for Renting

One of the most important aspects of investing in rental properties is the fact that you can easily qualify for financing. To meet the qualification requirements, rental property investors must have a high credit score, be financially stable, have a good income and have a steady cash flow. These are pretty much the same qualifications as any other highly valued asset like a government bond or security. You can then find high-quality multifamily real estate that is renting quickly and for high monthly rent amounts. 

More Value-Gaining Opportunities

When you ask a broker or agent how to invest in multifamily real estate, they will answer your query and also tell you how you can skyrocket your capital growth. When you buy a multifamily rental property like an apartment complex with low vacancy rates, you have a good source of passive income: rent. 

You can invest this rent further to buy more such properties or other valuable assets. Moreover, unlike a single-family unit which will not render you any income once the place is vacated, you will have a source of income from a multifamily complex as long as even one of the many units is occupied.

Tax Savings on Investment Income

The federal Internal Revenue Service allows investors to deduct the depreciation of their rental properties from their income. This means that when you receive a 1099-INT tax form detailing your income and expenses, you will receive an extra tax deduction of the fixed expenses like mortgage, taxes, and insurance on your rental properties. The IRS allows this deduction as an “ordinary and necessary expense” to keep your taxable income low.

In simple terms, it means that some of your taxes are substituted for the cost of buying multi-family properties and their maintenance.

Personal Satisfaction from Owning Real Estate

The satisfaction of owning your own business is a common theme associated with multifamily housing investment. You can hold your properties through investment firms that provide the funding and management required to run the rental properties. 

Investment firms offer various services to help you run the properties, including maintenance, property management, and bookkeeping. You can also make money by collecting rent from your tenants, who enjoy the flexibility of being able to choose when to move in and out of the unit and the benefit of full privacy.

Opportunity As a Landlord

Anyone can become a landlord. There are no experience or licensing requirements for landlords, and there is a wide range of properties that you can choose from when looking for tenants. You can also leverage rental properties as an investment opportunity. Many investors buy multifamily properties as an investment and rent them out to earn money while they wait for the investment to pay off.

Capital Appreciation

Investing in rental properties will appreciate in value over time. This will occur as a result of growing demand for properties that meet the specific needs of the tenants, such as larger units or distinct floorplan layouts. As long as the real estate market is stable, the value of your properties will grow. 

You can use this appreciation to reinvest in other properties, pay off debt or take a vacation across the globe! Multi-family apartment investing is a great retirement plan! Invest now and reap the benefits as you grow old. Wouldn’t that be a comfortable plan for old age?!

Scalability and Growth Opportunities

The growth opportunities in multifamily real estate are unparalleled. The best part about multifamily investments is that they can be easily scaled as your business grows. Instead of purchasing an entire building and renovating it from scratch, you can find smaller apartment complexes and rent them out for less than you would pay for an entire building. This helps you invest in properties with more potential for profit, which means higher returns for investors.

Buying multi-family properties might be the way to go if you are considering a passive income stream, especially if you are a real estate investor. Multi-family properties give you the ability to have more control over your investment and also offer additional perks, such as a larger tax write-off. The trade-off will be a larger loan to purchase the property and/or more renovation costs because of the many units to maintain. If you are willing to take on the extra work or have the funds for renovations, multi-family could be the way to go.

Not only is investing in multifamily real estate an intelligent financial decision, but it is personally fulfilling to many people. Whether you plan on doing the renovations and managing the properties personally or just purchasing them and having a real estate management company handle everything for you, the gratification of seeing tangible results is undeniable. Indeed, urban living may not suit everyone, but for those willing to give it a shot, you might be pleasantly surprised by how much you will enjoy it.

You can learn all about multifamily housing investment with The Multifamily Mindset!

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