Why Invest In Multifamily?

Take a look at some of the more popular reasons for investing in the multifamily marketspace.

The multifamily industry is no secret society. Multifamily properties make up one of the most popular investment markets around. But why is it such a widely used investment vehicle? Let’s look at a few reasons why people choose to make multifamily investments. There are many reasons, so we could go on forever, but we’ll try to keep this short and sweet. To start, some of the top reasons to invest in multifamily include: 

  • Supply & Demand: There will always be a need for people to have places to live and, until everyone in the United States can afford their own home the moment they turn 18, apartment units will likely be in strong demand. Currently, the U.S. is facing a major housing shortage, particularly in the affordable sector. By providing apartments to rent, multifamily investors are selling a much-needed product to their customers. 

  • Rental Income/Cash Flow: While this could apply to any form of commercial real estate (we’ll get more into comparisons later), multifamily investments are one of the best ways to generate cash every month. 

  • Leverage: Multifamily properties have the massive benefit of allowing borrowers to put down around 20% to 30% of the sale price while financing the rest over a 25- to 30-year amortization period. 

  • Equity Growth: Just like a single-family home, as time goes on, an investor generally will build up equity in their multifamily property as their mortgage is paid off. In addition, equity will increase if the property itself goes up in value. 

  • Supplementary Income: Although rental payments from tenants typically are the most substantial source of income for an apartment complex, other sources of income can make a serious difference. The most common supplemental income sources include laundry machines, vending machines, and parking spots for nonresidents (which can be enormously profitable in upscale urban areas).

  • Syndication/Partnership Potential: Multifamily properties are an ideal investment opportunity for groups of investors. By teaming up with others, an investor can purchase larger and higher-quality properties, maximizing their potential profits.

  • Tax Incentives: Multifamily real estate is an ideal investment from a tax perspective. Not only can investors take substantial mortgage interest and depreciation deductions, but they can also often deduct travel and utility costs as well as other expenses.