Investors who seek an extra stream of monthly earnings, as well as a modest but consistent appreciation in the price of their assets, can consider rental property investing. There are two categories of properties to consider in residential real estate: single-family homes and multifamily homes.
Since the past year, the Covid-19 pandemic has negatively affected almost every industry. Real estate investors have had a challenging year, but multifamily property owners have successfully negotiated the effect of COVID-19 on the rental market.
Difference Between Single-family and Multi-family?
Single-family rentals have only one accommodation unit, while multifamily homes have several dwelling units. One of the examples of multifamily residences is an apartment building.
For a tenant, single-family house is better if they are looking for more space with privacy, but it will cost more than a unit in a multifamily apartment.
Future of Real Estate
Due to new technologies and a stream of assets, the property investment business is undergoing significant changes. This capital raise should be taken as a hint that the real estate market is gearing up for fast transformation as modern digital resources become available. Specifically, investors should anticipate the influence of online property listing platforms, smartphone applications, virtual reality, and blockchain technology on all areas of property dealings.
Investors will soon notice increased competition amongst property listing services, all of which are focused on making it easier for potential or current landowners to buy and sell their properties. Similar systems will continue to be created, even if sites like Zillow and Trulia have occupied the industry for some years.
Because of the popularity of internet listing systems, investors and tenants will have a good concept of what they want while browsing for houses. Investors who want to remain ahead of the trend will have to adjust to buyers and sellers who can access hundreds of properties for sale with the click of a mouse.
Joining the home automation trend and installing appliances and other devices that are compatible with new applications is one way to stand out. Because of their greater safety and energy efficiency, these features are attractive to the tech-savvy generation.
Property investment smartphone applications will continue to revolutionise all areas of the real estate purchasing and selling process. Existing applications, such as DocuSign and Dotloop enable real estate agents to register and share agreements and other documentation on their phones. Other applications, such as Buildium and RentTrack, enable renters to pay their rent or connect with landlords via an online interface. These applications are projected to gain traction as investors look for ways to manage deal purchases, property maintenance, and interactions.
Why is Multi-Family Investment Better?
As compared to single-family, investing in multifamily rentals is more expensive. When a single-family house, on average, in the US, can cost around $374,900, the cost of a multifamily apartment can go up in millions. But, in return, multifamily will bring a hefty return on your investment.
Furthermore, it is a lot easier to finance a multifamily apartment, as the loan for it is more likely to be approved by the bank than for a single-family rental. This is due to the large flow of money every month. Let's say that there are several vacancies in your apartment building, but you will still be earning from the other few flats that are occupied. Well, this is not the case in a single-family home. It can either be occupied wholly or not at all, resulting in either a high income (but not higher than multifamily) or no income at all.
Multifamily real estate is also ideal for asset investors who seek to develop a big rental property. Acquiring a 15-unit apartment complex is significantly easier and faster than buying 15 separate single-family houses.
With the second approach, you'd have to communicate with 15 individual sellers and undertake examinations on 15 distinct homes, each with its own address.
In other circumstances, this strategy would also need an investor opening 15 different mortgages for every property. All of this trouble might have been averted if only one property with 15 apartments had been purchased.
Additionally, it even gives you the flexibility to hire property managers; they will be responsible for your property, such as handling everyday affairs at the apartment, collecting rent etc. This will save you time, which you can invest in somewhere else.
Reasons Why Multi-Family Investment Will be Beneficial in Future
With the addition of variants of Covid-19, there are chances of a pandemic in future as well. COVID-19 has had a significant influence on a wide range of industries throughout the world.
There have been some changes in the multifamily industry as well. However, it has remained steadfast throughout the epidemic. Even in times of financial concern, the multifamily business has shown to be stable, outperforming most other major property industries following the past two downturns. Any severe effects of the pandemic are likely to be temporary, implying that your multifamily funding will yield a higher profit in the coming years.
Moreover, people who own or rent single-family residences and have faced financial issues due to the pandemic are more likely to shift to flats or apartments as they cost lower.
Rental costs have fallen in several places as availability has increased, and need has been reduced as a result of COVID-19. But multifamily rental apartments are less affected by the rental slowdown since apartments with large or unusual layouts, beautiful vistas, and renovations continue to rent up at a substantial pace. If you're prepared to invest in a rental property, multifamily will provide you with greater leasing prospects in the short and long run.
Multifamily will continue to grow and return hefty profits in the coming five years, as due to the rise of the pandemic, many people are shifting to flats and apartments to cut down on their expenses.
As per some reports, multifamily has grown through these years as families have become smaller than before and require less space.
Property rates increase as time passes. Therefore, if you invest now in multifamily in the coming five years, it is more likely that you will get double the profit of what you may calculate now.
Multi-family are considered safer to invest in than other real estate classes. They have shown to be performing well during the financial crisis around the world, meaning that they will remain strong if there are any economic turndowns in future.
The chance of being unsuccessful is less. Some per cent of the building will always be occupied, if not all, as the population is growing and people obviously need a place to live more than anything. So the chance of declining is very little.
Furthermore, as an owner of an apartment building, you will earn more than an investor of a single-family house. It gives you a chance to invest passively. This means that you will pay the price to real estate experts to find the place in the most suitable location according to them, and deal with all the things such as making decisions like when to sell or buy the property as per their predictions about the changing rates of the properties.