What Makes Multifamily Rentals Sound Investments?
Anyone looking to build their portfolio and plan for retirement should really look into investing in real estate. There are many different types of properties to look into, and each one comes with their pros and cons. You could acquire office buildings to rent out to companies. You can also purchase a single family home, where you only have to deal with one tenant. However, many investors find that multifamily rentals, which are usually apartment complexes, are a sound investment that can really pay off in the long run.
If you can find a property in a great location, then you should have no problem filling it with tenants. Before acquiring an apartment complex, there are a few things you want to look for. You want to familiarize yourself with the surrounding area to see what entertainment options and schools are nearby. A property situated in a great part of town means that you will get more people applying, more people wanting to renew their leases and the ability to charge more in rent.
Additionally, you will have steadier cash flow coming in from multifamily rentals. For example, if you rent a building to a business or single family, then you are reliant on that party paying rent on time. When a single tenant is late on rent, you are put in a real bind. You may have to evict the tenant, but that just means you have to fill the building again quickly in order to get money. With multifamily properties, you have a little more leeway. If just one apartment is late on rent, you still have cash flow coming from the rest of the units. This eases the strain placed on you a little bit.
Before buying any property, you will want to make sure that you will have enough cash coming in that will allow you to make your mortgage payments while still turning a nice profit. A good rule of thumb to follow is that you never want to spend more than 50 percent of rent on mortgage payments. With apartment complexes, it is much simpler to meet this threshold because you have plenty of rent money coming in.
Similar to any other type of property, multifamily rentals require plenty of research. You need to look into several different complexes in order to see which one will best meet your needs. As long as you do your homework and make sound decisions, you should have no problem turning a profit.