There are different types of investments in the real estate including single family, multifamily, mobile homes, land, retail, office, Industrial, self-storage etc. Investing in multifamily homes is very attractive for the following reasons.
Multifamily Top 10 reasons as why multifamily investing is a good investment.
- Real Estate: Real estate is a tangible asset, unlike stock or bonds. Real estate investment provides stable assets compared to the volatile stock market. Real estate investment has been an excellent hedge against inflation.
- Rental Demand is Strong: There is a strong demand for rental units. Demographics trends, the rising cost of homeownership, lifestyle preferences, and debts are some of the reasons why there is a strong demand for rental units.
- Passive Income. Investing in multi-family real estate is a great way to generate passive income. According to CBRE report, multifamily investment had an average of 9.8% return in the last 25 years.
- Multifamily is more stable during recessions. Multifamily property is a safe investment compared to other investments like retail, office, or land. People cut spending on discretionary items and services and travel less to save money, but they need a place to live. Multifamily is less impacted by cyclical downturns compare to other property types like office, retail etc.
- Millennials and Baby boomers are renting: Millennials are renting more according to US Census Bureau. According to a report, baby boomers are shifting from homeownership to rent for the aged 55 plus.
- Loans are Less Risky. Income from rents comes from multiple tenants compare to anchor tenants for Retail or Office. Getting approval for multifamily loans are easier than for other property types.
- Rent increases keep up with inflation. Typical increases in yearly rents are in tune with inflation. Rent increases will be higher in high demand areas or with improved amenities.
- Depreciation and CapX. Capital gains can be reduced with depreciation and capital expenditures. CapEx can be used to upgrade the property.
- Economics of scale: We only need to replace 2 or 3 roofs if need be for 20 units compared to 20 roofs for single-family homes.
- Easier to Manage. It is easier to manage 100-unit property compare to 100 separate houses. It is easy to hire a manager to manage the multifamily property with less commission compared to other property classes.