How many real estate investing strategies can you name?
If 1,000 people were asked the same question, I could almost guarantee that multi-unit rental properties would be on every list. The reason for the popularity is profitability.
When investors start buying multi-family homes, they often keep going because of the numerous benefits to be had. Today, you’ll be learning about the big ones.
But before we start, what is a multi-unit property?
It could either be a duplex (two units), triplex (three units), or multi-family (4+ units). Essentially, anything that isn’t a residential property for one family (single-family home).
By the end, you’ll become the newest Zillow super scroller.
The obvious benefit when it comes to multi-unit real estate is the cash flow.
But for the cash to start flowing, the income from the tenants must cover the general expenses. Things like the mortgage, utilities, taxes, and other typical costs.
Now picture yourself owning a single-family home.
A potential problem you may face is a vacancy. This means, no one is renting from you.
Now, you have no income to cover the costs of the expenses!
But if you had a multi-family property, you could have some vacancy while still bringing in money to cover the costs of your units. As I’m sure you can assume, the cash flow is strong when all units are occupied.
That is why multi-family homes can become so lucrative.
Have you ever heard of a property manager?
They deal with things like maintenance, repairs, paperwork, or any other issues a tenant may have. They’re super helpful, making the process almost 100% passive.
This gives you time to focus on other investments, a job, or any other project you may have.
Banks love multi-unit properties.
Why? Because they know that it will most likely be an income-producing property, which makes them more willing to give you a loan. You might even be able to shop for a lower interest rate on the mortgage which only compounds the effectiveness of this strategy.
If you’ve ever heard of the BRRRR model, it works wonderfully with multi-unit real estate.
Once you start working your way up to the bigger buildings like triplexes and quads (multi-unit), you will have some quality experience under your belt.
This provides a wonderful foundation for a future move into the commercial sector. And I’m not talking about TV. With properties having 5 or more units, they are considered commercial real estate, and that’s apartment complex territory.
It’s also where the big bucks are.
Since multi-family homes are income-producing properties, you can start using deductions.
Things like utilities, repair costs, property management fees, and insurance expenses. One great example is depreciation. For the long term, as your property and appliances age, you can write off the depreciation of those assets to save on your tax bill It’s a nice strategy among the other benefits that come with owning multi-unit real estate.