The Benefits of Building a Multi-Family Home
A multi-family home is a residential property with more than one housing unit. Typical examples of multi-family homes include duplexes, townhomes, and apartment complexes. When the property owner opts to reside in one of their multi-family units, it is known as an owner-occupied property.
Here’s an overview of different kinds of multi-family housing units:
- Duplex: A duplex consists of two distinct living spaces, one on each floor, each occupied by a separate family. Though there may be one shared front door, each unit has a separate entrance.
- Townhouse: A townhouse is designed to accommodate two families in a single building, with an interior wall dividing the units. Each family owns their respective unit, and both units come with a separate entrance.
- Apartment Complex: An apartment complex is a single building containing five or more individual housing units. Residents have access to shared amenities such as a swimming pool, parking garage, or playground.
- Semi-detached House: Like a townhouse, a semi-detached house shares a common wall with the adjacent home.
Here are some compelling reasons to build a multi-family home.
Increased Cash Flow
Investing in a multi-family property is a great way to create an additional income source. Multi-family homes generate more cash flow than single-family properties. In a multi-family property, multiple units are located close to each other. As a result, managing them is easier. A single team manages multiple units, helping reduce property management costs.
Forced appreciation refers to the increase in value of an investment property, resulting from actions taken by the property owner. Multi-family properties offer more opportunities for owner-driven appreciation, as even minor changes can add value that impacts multiple families rather than just one. A larger multi-family property usually features extensive common areas and community amenities. Improving these areas can increase the property’s value.
Expenses incurred by multi-family property owners to improve the features of their properties are spread across several families, making the cost per family often significantly lower.
Rental income from your multi-family property can help you cover mortgage expenses and your housing costs.
A Multi-Family Home Can Be Easier to Finance
Though the cost of constructing a multi-family home is typically higher than a single-family property, multi-family homes are often easier to finance when considering all factors. Though this may sound counterintuitive, real estate investors should realize that multi-family properties often present less risk to lenders, as multiple families live under one roof.
When offering a loan for multi-family home construction, the lender has peace of mind knowing that even if some families move out or pay their rent late, the property will still yield a steady income, and the property owner can meet their mortgage repayments.
Grow Your Portfolio Quickly
Investing in multi-family real estate is a great way to build a larger portfolio of rental units. For example, buying a property with 40 housing units is generally simpler and more time-efficient than acquiring 40 single-family homes.
If you decide to purchase 40 individual single-family homes, you would have to negotiate with 40 different sellers, inspect each house, and may even have to secure 40 different loans for each property. This process can be fraught with complications and headaches. Purchasing a multi-family property with 40 homes is a much better option and a great way to avoid hassles.
Multi-family construction projects are complicated and multifaceted. When selecting a multi-unit builder in Sonoma County to manage your project, ensure they are equipped to handle complexities and have the experience and expertise to develop a bulletproof plan that prevents unwelcome surprises.
Multi-Family Properties Are Easier to Manage
It’s typically easier to manage houses within a single building than managing rental units spread out over a large geographic area. If you own a single-family home, hiring a property manager may not make sense. Hiring a property manager to manage a multi-family home, on the other hand, makes a lot of sense.
There are also some tax benefits of investing in a multi-family home. This will vary depending on where you live but is worth investigating in your area.
- Posted On September 29, 2023