There are many different ways to make money in real estate. In this blog, we want to show you why we chose multifamily versus single family as our main asset class. We want to provide you a comparison between the two and most importantly to educate you to make the best investment decision.
RISK DIFFERENCES
Multifamily is less risky when it comes to vacancies and the ability to cover unexpected expenses that occur on an investment property. In terms of vacancies on multifamily properties, there’s a very slim chance to have 100% vacancies. If there are vacancies, there is still enough cash flow collected to cover the vacant units. With these multifamily properties, they produce a TON of cash flow. So if an unexpected expense or an unexpected maintenance issue comes along, you have enough cash flow to cover it. In contrast, in single- family homes, if there’s a vacancy, it can completely halt the cash flow. Then when any unexpected expenses arise, the investor would have to put additional money to cover these expenses.
FORCED APPRECIATION
One of the best benefits to real estate investing is forced appreciation. Forced appreciation is the increase of value of a property due to the particular investor’s actions. In single-family homes, you can have forced appreciation by renovating or flipping. But the market and the pricing of surrounding homes in a particular neighborhood called comps home determine the true value of a single family home.
However, multifamily properties are not subject to the market and have higher leverage to force a properties’ appreciation through different strategies to increase NOI and cash flow. In multifamily many syndicators as ourselves choose to invest in value-add apartment complexes for the ability to drastically force a property’s appreciation.
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