Are you considering investing in Multifamily? There are numerous benefits on why to invest. As a newer investor, consider why you want to invest in real estate:
Loan paydown (tenants build you equity). You are not paying the mortgage yourself! Over time, you are building wealth since you are paying down the loan. Keep in mind, when analyzing a rental property you also want to include vacancy so you can cover when you need to rent your units.
Cash Flow (Income- Expenses, passive income — IF you buy right!). You have control over your investment. Your job as an investor is to see if there is a value add in the property. Also are you able to decrease your expenses? Mass Save is a program offered in Massachusetts that will assist you in making your home energy efficient.
Appreciation potential- Can increase on par with inflation. The property can increase in value over time. I would not bank on speculation, but if it happens it is icing on the cake! You would not want to bank on appreciation, and your investment should cash flow before any appreciation.
Tax Benefits- Interest you pay on a mortgage, the expenses, the depreciation of the property, cost segregation analysis. The cash flow can also be depreciated on paper to show a net loss on a tax return while still making money. This is different than a dividend income such as index funds (which I also invest in).
Leverage- You can borrow the majority of the money to fund your deal. You can buy with 3.5% down and house hack using a FHA loan. There are other programs (owner occupied) that are less than 20% down. In Massachusetts, there is MassHousing 5% down. Even at a 20% conventional loan, you are still able to borrow a great deal of money for your investment.
Management- If you don’t want to manage your property, you can hire it out! It is critical to factor in property management in your analysis. Call local property management companies for the best rates. Self managing is great since you can see if you are fit to be a landlord.
You can work a full time job. Once you create systems, real estate can be fairly passive. Ideally, you want to know who you will call in case of emergency for plumbing, etc. If you are able to purchase, you are having your money work for you which is what investing is all about!
Hopefully this is article helpful! If you enjoyed please share with a friend. I would be excited to hear if your thoughts on why to invest in multifamily.
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