Often investors begin by purchasing a single family home as their first investment property. They simply hear that it is better investment and then they continue to concentrate on adding more single family homes to their inventory.
Many investors simply become stuck in a rut and don’t fully consider the many advantages associated with investing in small apartment buildings, or multi-units, rather than single family residences (SFRs).
Whether you are a first-time investor, already have some experience in the real estate investment market, or are an experienced real estate investor, you owe it to yourself to learn all about the advantages available to you when you invest in small apartment buildings over single family houses.
Build Wealth Faster
The number one reason why real estate investors begin investing in small apartment buildings as the desired property to place their hard-earned money is that investors can build their wealth portfolio faster. That’s because you receive more cash flow when investing in a small apartment building. A building with five apartments means that you have rent coming into your account from 5 tenants on a monthly basis, which is a much larger flow of cash every 30 days than having just one rent check from the lone occupant of a single family residence.
Owning a small apartment building actually puts your investment at less risk than investing in a single family home. If a tenant leaves your single family residence, you have lost 100% of your rental income at once. If a single family home tenant refuses to leave but stops paying rent, you could be tied up in legal battles for months and risk losing your property. But if one tenant leaves a 5-unit apartment building, you only have to replace 20% of your income, with cash continuing to flow from four other units so that you have no trouble in paying your mortgage and other operating expenses while you search to replace that fifth tenant.
Ease of Management
Let’s say all of your investments are tied up in four single family houses. Well, you are responsible for the repair and upkeep of four separate roofs, four garages and driveways, in addition to handling the exterior upkeep and maintenance of those four homes, in addition to keeping the landscaping and lawns of all four properties in good condition. That’s a lot of expenses eating away at your profits. But with a multi-unit building, with all of your tenants located under one roof, your expenses are not multiplied, since there is only one roof, one garage and one lawn to maintain.
And because small apartment buildings provide you with a bigger monthly cash flow than you would receive by investing in a single family residence, you always have the option of hiring a management company to oversee operation of the building. This is an especially important consideration if you don’t want to personally have to collect rent checks from your tenants or don’t want to be bothered at all hours of the day or night, holidays and weekends included, when the garbage disposal stops working or a toilet has become clogged. Having a management company on board because you can afford to hire one is a much more efficient use of your funds so you can spend your valuable time searching for additional multi-unit properties to enhance your real estate portfolio.
Larger Pool of Tenants
On any given day, there are more people scouring the apartment rental ads when looking for a place to live than there are people searching for a single family house to rent. It can actually prove much easier to fill a 5-unit apartment complex with desirable tenants than it can be to find that one credit-worthy tenant who wants to move into the SFR you have invested in. Likewise, when an apartment tenant moves out, it’s a much faster and easier process to get an apartment ready for the next tenant than it is to get an entire house ready to attract a new renter for a single family home.
Because apartments get depreciated over the course of 27.5 years, you can get a larger tax write-off every year when the property is a small apartment building as opposed to a single family home or other type of property. We recommend you discuss the finer details with your own tax attorney, but the tax benefits associated with investing in small apartment buildings are definitely something to consider before you commit your money to buying another single family home.
Although purchasing a small apartment building may require a bigger commitment of your funds initially than purchasing a single family house, the dollar amount of appreciation will likewise be much larger. While a single family residence may appreciate by only $10,000 within several years, the appreciation on an apartment building whose purchase price was three times that of the house will be $30,000, representing a faster return on your investment for your bank account.
No matter what your level of real estate investment experience, we know you have all heard tales of just how easy it is to buy a single family home and flip it for a handsome profit. But in reality, real estate investors who realize the biggest gains are those who have focused their energies on investing in small apartment buildings, with one or two single family homes in the mix.
There is no better time than the present to consider investing in small apartment buildings. Healthy cash flows, a larger pool of prospective tenants, great tax benefits and a healthier return on investment are just some of the advantages of investing in small apartment buildings rather than limiting yourself to single family residences.
If you are currently an investor in a single family residence, now is the best time to consider branching out and exploring the possibility of adding the right small apartment building investment to your growing real estate portfolio.
If you are just starting out in your real estate investment career, why not consider a small apartment complex as your first investment property?
If we have whetted your appetite for small apartment investment even just a little bit, we invite you to start your search here and request our support, a team of experts at your disposition. We have all the answers to your questions about why investing in small apartment buildings over single family homes can help you achieve your financial dreams much faster!
Please Call 305-785-1688