If you’re looking for a passive income stream, you can’t go wrong investing in real estate. There are plenty of ways to invest in real estate without having to worry about selling or renting out the property. One of the most profitable, yet passive, ways to invest in real estate is through multifamily properties. What exactly is a multifamily property? Think of a hotel with multiple floors. Each floor is considered a unit for the purposes of the property’s rental agreement, which means you’ll earn money from each guest who stays at the property.
The best part about multifamily properties is the amount of potential income they generate. While it’s true that you’ll need to put in a lot of work to generate income from a single property, the amount of effort required is significantly less than that of a traditional investment. You’ll need to be present at the property and make sure it’s kept clean and safe. However, other than that, you don’t have to do much.
The most important thing to keep in mind if you decide to invest in multifamily properties is to do your research before making any kind of purchase. You can click here to see an example of a good multifamily property investment. From the photos displayed on the site, the property itself looks nice and the location is perfect for anyone who wants to live in Southern California.
Table of Contents
The Benefits Of Multifamily Properties
If you’ve decided to buy a multifamily property, here are some of the many benefits you’ll enjoy:
Passive Income
One of the primary reasons why you should buy a multifamily property is because it’s a great way to generate passive income. As we mentioned earlier, each unit in a multifamily property is considered separate and independent from the other. That means you’ll be able to sell each one individually if you decide to do so. In addition, you can rent each one out separately as well. So, even if you choose not to sell the property, you’ll still be able to generate income from it.
You might be thinking that buying a single-family home will generate more passive income. But, that’s not true. It might give you quicker and easier access to the money you need, but that’s about it. In order to maximize your income potential from a multifamily property, you should invest in several of them and connect the addresses to create a small community. That way, you can enjoy the benefits of multiple income sources and minimize your risk whenever you decide to sell.
High-Profit Potential
Another great thing about multifamily properties is the high-profit potential they offer. As we mentioned before, each unit in a multifamily property is considered separate and independent from the other. So, if you decide to sell one of the units, you’ll be able to maximize your profit by simply selling the other units as well. One of the best things about this situation is that the investment itself is relatively low. You’ll need to buy several units to make it worthwhile, and each unit has a different value. That means you’re not committing an awful lot of money to the overall investment, which potentially makes it more manageable.
Even if you choose not to sell the property at all, you’ll still be able to enjoy the high-profit potential it offers. You don’t need to do anything aside from keeping it maintained and safe. In some cases, you might even be able to borrow against the property’s value, in case you need additional capital for whatever reason.
Minimal Capital Needed
Buying several units of a multifamily property means you don’t need to spend a huge amount of money to buy the entire thing. The capital requirement is minimal, and that’s a great thing, especially if you want to make the investment as risk-free as possible. If you decide to buy one unit, you’ll need to put down a 20% down payment, and the rest will be paid over 15 years with interest. So, while it might be tempting to choose an individual unit and save the rest for whatever needs you might have, later on, investing in several units as part of a multifamily property is the safer bet.
No Risk Of Being Overwhelmed By Updates
Updates are one of the main things that can put a damper on an otherwise lucrative investment. After all, the more a property is updated, the more value it has. In the case of multifamily properties, it’s relatively easy to make updates and keep up with them, as each unit is considered independent and standalone. That means you’ll only need to do maintenance on one unit at a time. So, even if you have several units, you won’t be faced with the daunting task of keeping all of them updated at once. Take the time to update and maintain one apartment at a time, and you’ll increase the profitability of your investment significantly. In addition, you won’t need to hire contractors to do the work, so you’ll save money in that regard as well.
Flexible Lifestyle
One of the biggest appeals of multifamily properties is the flexibility they offer in terms of lifestyle. As we mentioned before, each unit is considered a separate and independent investment property. So, you have the option of simply living in one of the units and enjoying the perks that come with it. In some cases, the other units in the building can be rented out as well, so you can enjoy the benefits of multiple income sources, without having to own all of the property yourself.
You might be thinking that buying a single-family home will give you the flexibility to have a more luxurious lifestyle. But, that’s not necessarily the case. It depends on what you want out of life. If you want to enjoy the conveniences that city life has to offer, then owning your own home is still the best option. But, if you want a more flexible lifestyle and don’t mind living in smaller quarters, then investing in a multifamily property is the way to go. In some cases, the other units in the building can even be rented out by the homeowner, so you can enjoy the benefits of multiple income sources without having to live in a dormitory.
Reduces Estate And Probate Taxes
One of the biggest perks of investing in real estate is that you can significantly reduce your estate and inheritance taxes. As we mentioned before, each unit in a real estate investment is considered a separate and independent investment. That means your total estate will be split up between all the individual units you own. In some cases, the individual units in a building are even worth more than the whole property. So, if you want to minimize your taxes, it’s a good idea to invest in several of these units.
To help you get started, we’ve compiled a list of what is commonly asked by first-time and new investors. This should answer all of your questions about buying a multifamily property or any other form of real estate investment for that matter!
How To Buy A Multi-family Property
If you want to invest in a multi-family property, the first thing you’ll need to do is determine the best location for the property. Ideally, you want to buy a place that’s close to schools and has easy access to public transportation. Traffic is another important factor to consider. In addition, you want to make sure the property is in a good neighborhood. That’s going to depend on what type of lifestyle you want to live after the investment. If you want a quiet place to relax, you might want to look for a residential area that’s far away from traffic and has no nearby businesses that could pose a threat to noise pollution.
If you can find a good location and decide it’s worth the hassle, the next step is to determine how much you’re willing to spend. You’ll need to do your research and find out what the going price is for a similar unit. Keep in mind that the price of a multifamily property will depend on a lot of different factors. The type of area you’re in will have an effect on how much you should pay for a unit. In addition, the condition of the unit itself will determine how much you’ll get for your money. You’ll need to make a final decision and go for it.
As we mentioned before, each unit in a multifamily property is considered separate and independent from the other. So, if you decide to buy one unit, you’ll need to put down a 20% down payment and the rest will be paid over 15 years with interest. One of the best things about this type of investment is that there’s no risk of being overwhelmed by updates or having to maintain the entire property yourself. The only thing you’ll need to do is to keep the unit itself clean and safe. But beyond that, you don’t have to do much. So, if you’re looking for a passive income stream, buying a multi-family property might be the way to go.