Buying this type of property could double your passive income
IInvesting in real estate can be a great way to generate passive income each month, especially if you use a long-term investment strategy. That said, if you’re really looking to maximize the amount of your income each month, you might want to focus on investing in multifamily real estate.
Simply put, there are many advantages to choosing multi-family real estate for your portfolio over single-family homes. Keep reading to learn more and to get a better idea of whether investing in multifamily properties is the right strategy for you.
What is multi-family real estate?
As the name suggests, the term multifamily refers to residential real estate purchases that include more than one unit. Typically, this designation is used to describe apartment buildings and condominiums. However, it can also refer to smaller buildings, such as duplexes and triplexes.
Units can either be stacked on top of each other or placed side by side. As long as there is more than one unit in the property, it is classified as multifamily real estate. If there is only one dwelling, the property will instead be considered a single-family home.
Here are some of the benefits of investing in multifamily real estate.
There are more opportunities to generate passive income
Above all, multi-family properties offer the possibility of generating additional income passive income. If you invest in a single-family rental, you will have the opportunity to collect monthly rent from your tenant. On the other hand, with a multi-family property, there are several tenants and you will have the possibility of collecting several rents.
Additionally, multi-family properties usually offer the opportunity to generate income from a few different sources. For example, if you buy an apartment building, you may be able to earn extra income by charging for the use of certain amenities, such as on-site laundry facilities or a swimming pool.
There are fewer risks
While the ability to earn more passive income is a major benefit to investing in multifamily real estate, it’s not the only one. Another advantage here is that there is often much less risk involved with this type of investment. In this case, the absence of risk comes from the fact that there will be several tenants living in the property.
When you own a single-family rental and your tenant leaves, you may find yourself stuck carrying the property around until you find a new tenant to replace them. However, with a multi-family property, the financial burden of transporting the property is spread among multiple tenants. Since it’s unlikely that all your tenants will leave at the same time, you can almost be assured that you will always have income, even if the unit turns over.
There may be potential for attractive financing options
The final advantage of investing in multifamily real estate is that there may be potential for some attractive financing options. Too often, new investors are hesitant to invest in multifamily real estate because they don’t want to be faced with the hassle of securing outside investment financing.
At its core, home hacking is simply living in a unit of your investment property. As long as you intend to use the investment property as your primary residence, it is possible to purchase a multifamily property with an FHA or VA loan. This means you’ll have access to their more flexible qualification requirements, including lower down payments and credit score requirements.
Are you ready to invest in multifamily real estate?
Investing in multifamily properties may not be the right investment strategy for everyone, but if your goal is to generate as much passive income as possible, it’s worth considering. If you are considering going this route, be sure to do your research to property investment so you have a better idea of what to expect and can connect with industry experts who can help you through the process.
10 stocks we like better than Walmart
When our award-winning team of analysts have investment advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*
They have just revealed what they believe to be the ten best stocks for investors to buy now…and Walmart wasn’t one of them! That’s right – they think these 10 stocks are even better buys.
Equity Advisor Returns 2/14/21
The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.