Marketing Tips for Multifamily Investments
Multifamily properties appeal to investors because they provide a steady and predictable income stream. The multifamily investments structure also offers decent tax benefits.
There are two different kinds of multifamily investments: commercial and residential. Apartments, hotels or motels, and office buildings are examples of commercial multifamily ventures. Residential multifamily properties include duplexes, senior citizen homes, townhomes, condos. There are a few things you should do before buying a multifamily investment property, regardless of the type of multifamily property you wish to buy.
Marketing is an essential part of your multifamily investments property success. it is important to have a good property, location is just as crucial to its sale. Not everything works for every property; therefore, it’s important to figure out what does and doesn’t work for the home you have. Use the tips below to create a multifamily investment marketing plan that helps you sell your home faster.
Tackling this type of investment, however, can be a large undertaking. It’s important to consider the characteristics of multifamily properties and the needs of residents before making a purchase decision.
Here are some questions to consider:
How is the multifamily market in your area? Some areas have housing shortages and are seeing strong growth in this sector. In other areas, you might find it difficult to find as many units to purchase or rent out.
What type of property makes sense? Apartment buildings are most common, but single-family homes can be a good option if you’re looking for something more private or manageable.
What kind of financing should you use? Consider using mortgage notes or seller financing, which lets you use cash flow from rental income to pay off a loan over time. You may be able to use existing buildings and improve them over time with a low-interest loan.
Who is going to manage the property? If you want to focus on other aspects of your business, hire a management company that charges an annual fee rather than taking part in profits. This can free up your cash
Advantages of Multifamily Properties
- Multiple Rent Streams – One of the biggest advantages of investing in multifamily real estate is that you can generate revenue from multiple tenants. For example, if you’re renting a two-bedroom apartment to a single renter, you’ll receive rent for only one unit. However, if you divide that same apartment into two units and rent them both out, now you have two streams of income from just one asset. This is beneficial because multifamily properties are typically more expensive than single-family homes, so having more tenants can help offset expenses.
- Less Management Required – Another advantage of multifamily properties is that they require less management.
- Multifamily properties provide strong returns on investment – According to the National Association of Realtors, as of 2016, the average return on investment for single-family homes was 5 percent and 7.7 percent for two-to-four family homes. By comparison, multifamily properties always yield a higher return on investment than single-family homes because they can be split into individual units and rented out separately. Additionally, you can take advantage of tax breaks such as depreciation deductions and favorable loans that reduce your tax burden and increase your cash flow.
- Construction costs are lower with multifamily housing – Building multifamily housing is generally more cost-effective due to economies of scale when it comes to purchasing materials, hiring labor, and managing projects. The construction costs associated with a single-family home construction will be multiplied when building an entire project, which increases the overall income potential for multifamily properties versus single-family homes.
Key aspects of Multifamily Properties
As with any investment, it’s important to consider the market conditions before you jump into a new venture. For multifamily properties, there are some key aspects to look at:
Location – A property’s location is one of its key features, so take the time to consider what makes a good location for rental properties. You’ll want to find a neighborhood that is growing and has plenty of available amenities nearby. A property in an area that is seeing rapid decline might not be the best choice.
Logistics – What kind of access do tenants have to their place? Will they need to travel through dangerous neighborhoods or cross major highways? When considering multifamily properties, think about how tenants will get to and from the building. Think about how easy it will be for your tenants to move in and out, as well.
Property Value – How much would you have to pay for the property? Does it have good resale value?
Final Thought
Like single-family homes, multifamily properties are a great way to invest your money. They can offer very steady returns and help you achieve your financial goals. But they have unique risks and benefits unto themselves, including the chance to diversify your portfolio so you aren’t placing all of your investment eggs in one basket.