Year-after-year, we see increased demand in the multifamily real estate sector. By all indications, this commercial real estate sector will continue to perform. The top reasons for this include the fact that many millennials are renting over buying homes. We are seeing a lot of apartment complex conversion into retirement communities. Also, 75+ million Baby Boomers are heading into retirement.
Moreover, multifamily is a favorite among commercial real estate investors. Preference is given to this sector for many reasons. Although, the strong monthly income, ease of management and steady appreciation tops the list.
When thinking about multifamily, it is also important to note that this sector includes more than apartments. Student housing and senior housing also fall under the multifamily real estate category. Below, we outline the three main advantages to investing in multifamily real estate.
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Reason 1 to Invest in Multifamily Real Estate: Cash Flow
Let’s be honest, one doesn’t choose to invest in commercial real estate for the fun of it. It’s all about the returns. If you’re focused on profits, you will soon realize no other investment, or sector, beats the monthly cash flow multifamily provides
Also, instead of collecting rent from one source, you can have anywhere from 20 to 100+ income-generating tenants under one roof. Large portfolios equal large profits.
Multifamily properties offer many opportunities for bonus profits. Think coin-operated laundry facilities, vending machines or other income-producing add-ons. These add-ons not only keep tenants happy but put money back in your pocket.
Reason 2 to Invest in Multifamily: Easy Management
Along with cash flow, another major reason to invest in multifamily is the ease of management. Managing these assets won’t break the bank or cause constant headaches. Thus, the reason multifamily property management is usually thought of as affordable and “easy” is two-fold.
First of all, with all that cash flow and income you are earning on your multifamily investments, you can afford to hire a professional. This professional will deal with the day-to-day management of your properties. Say goodbye to self-management…winning! Owners who hire professional management most of the time see reductions in operating expenses. This means further strengthening returns.
Second, beyond the luxury of hired property management, multifamily real estate is easier to manage. This is due to having many units under one roof in a centralized location. Property Management expenses are thereby lowered from centralized teams. Also, property managers don’t have to deal with properties that spread out across large geographic areas.
Reason 3 to Invest in Multifamily: Great for First Time Investors
Those new to the commercial real estate game think of investing in real estate as owning rental properties
. It makes sense that you would want to buy something that will immediately start giving back. But, those looking to build a returns-driven portfolio pick multifamily as their investment of choice
. They choose this instead of purchasing one income-producing asset at a time.
Furthermore, multifamily is the only sector where you can go from 0 to 20 income-producing assets in one transaction. Oh the joy of it! One seller, one bank, one loan, one inspection. Multifamily purchases are one and done, making them a great barrier to entry for newbies to investing.
Is Multifamily Right For You?
In conclusion, all commercial real estate investors have their specific goals. Whether you are looking for quick turnover, immediate returns, or a long-term investment. Defining your goals is an important first step to CRE investing. If you think that multifamily may be the best option for you then start with these first steps: 1. Hire an experienced commercial real estate broker to guide you through the process and 2. Start searching for what is available in your market. Happy hunting!
Percival Partners is one of Charlotte’s most recognized and respected commercial real estate firms with more than 50 years experience in the region. Our professional and experienced real estate Advisors are in the business of listening, understanding, and adding value. No matter the commercial property type you own or seek, you can count on the Percival Partners team to maximize your return and peace of mind. To reach us, you can call us at 704.632.1000 or follow us on Twitter at @SVNPercival, LinkedIn or Facebook.