Multifamily investing is a great means of creating a steady revenue flow from monthly rental income. While multifamily properties are large in size and quite expensive to acquire, the benefits that these assets come with are excellent for any real estate investor that wants to make their investment worthwhile.
There are many different forms of real estate investment, but multifamily real estate investment provides a great solution for effectively entering the real estate market. Within these multifamily properties, there are different types and classifications that mark the asset based on quality and condition.
Here, we will closely look at what real estate and multi-property investments are, why multifamily properties are popular with investors, and the three distinct types of multifamily property assets that exist.
Table of Contents
The Purpose of Real Estate Investment
Investing has many different shapes, types, and forms. From the stock market to the real estate industry, there is something for all investors. Real estate investment is the preferred form of investment because the assets an individual investor invests in are of a physical nature.
This means that it cannot simply disappear overnight due to market fluctuations like many other forms of investment.
Real estate investment also widens the different avenues in which an investor can make a steady flow of revenue that increases with their property portfolio size. Some of the different property types include corporate and office buildings, multifamily property, single-family property, new construction projects, and other various forms of real estate that may be on the market.
What is a Multifamily Property?
A multifamily property is often a large-scale property that has the ability to house numerous renters. These buildings often include closely linked housing units that can be rented out to potential renters at a fixed monthly rate.
Depending on the geographical location, visual appeal, and many other factors, the rate of rent can increase or decrease to suit the building’s needs. Multifamily properties serve as an innovative addition to many real estate investors’ property portfolios and are commonly held for a long period of time.
Benefits of a Multifamily Property
There are many reasons why multifamily properties are so appealing to real estate investors. These benefits come in different forms and may be both short and long-term.
It is good to understand the benefits that come with a multifamily property because it allows an investor to understand the importance of including this property type in their portfolio.
Monthly Rental Income & Appreciation
The most appealing part about investing in a multifamily property is the monthly rental income that an investor can receive. This is a stable amount that does not consistently fluctuate. This amount provides the investor with a stable flow of monthly revenue that can be used on various other facets.
Appreciation is another key factor of this building type. Multifamily properties hold their property value exceptionally well and often increase as the years go by. Having a well-maintained building and property can also substantially raise the property value as well as the rental price.
Many multifamily property owners enjoy the benefits that come with investing in a multifamily home. This building type receives these tax benefits because it supplies the population with a large amount of housing.
Since there is not enough housing to meet the general demand of the public, the government loves seeing investors that assist with this matter. This provides the individual investor with more funding and resources to undertake various other projects.
Easier to Manage
Due to the nature of the building, it is substantially easier to manage than other real estate types. Since there are numerous housing units that are close together, and often under the same roof, it allows for the real estate investor to easily check up on the building.
This close proximity provides an easier space to manage for the investor without having to constantly travel between a high number of real estate assets.]
A property manager or property management company can be hired to also assist with the day-to-day operations which can lower the total need for the investor to be on-premises.
Strengthens Investment Portfolio
Since there is a consistent and steady flow of revenue from these investment properties, this provides the investor with a substantial amount of monthly revenue to increase and widen the scope of their property investments. Having a strong and diverse property portfolio is a great way to boost the total investment scope that an investor works with. The more properties that an investor can manage, the greater the opportunity for success becomes.
Different Types of Multifamily Properties
When investing in multifamily properties, a potential investor may come across three distinct multifamily property types. These types are used to classify the property based on various different factors.
The classification may vary from market to market but these classifications are based on the acceptable physical condition and market attributes that the building may have.
Class A multifamily properties are considered to be the safest real estate multifamily investment types because of the low-risk nature that surrounds them. These properties are often located in prime markets that are surrounded by a booming economy.
Class A buildings are usually well-positioned near key points within a region, and close to amenities such as universities, workplaces, hospitals, and recreational facilities. They also offer easy access for residents to public transport and means to get around the area.
The reason this classification type is considered a safe option is that it is more appealing for potential renters since the aim of this building type is to meet the needs of its residents.
When looking at the physical and visual appeal of these buildings, they are often newer and in better condition than the rest, although there are exceptions to the rule. Refurbished and well-maintained older buildings that share the same attributes as their newer counterparts can also be considered as a Class A building type.
The downside to a Class A building is that they are often in high demand from investors around the world. This means that the purchasing power required to obtain these rental properties is often exceptionally high and unrealistic for most investors.
Class B serves as the middle ground between the classes. Being a slight step down from Class A, these properties are usually located further away from the prime markets in which you will find a Class A property.
These are often older buildings that come with slightly higher maintenance costs. These buildings usually require a slight level of renovation and improvements to various features before entering the rental market.
Since these properties are often located near the outskirts of prime markets, they have less access to common amenities which makes Class A properties appealing. This means that the total rent that they demand is lower than that of a Class A building.
Although there may appear to be negative aspects to this class type, there are many benefits. These buildings are slightly cheaper to obtain than a Class A building and the residents that it attracts often provide a stable flow of revenue.
Although Class C residential properties may be considered as a part of the lower end of the spectrum and riskier than the rest, these rental properties can be exceptionally lucrative if they are approached by the right investor. A large part of what classified these buildings into Class C is that they are typically older than 20 years and require quite a bit of renovation.
These buildings are often much older than the rest and due to negligence in the past, may require a good amount of care to bring them to livable conditions. These buildings are often positioned in lower-income areas that may also have higher crime rates. The local amenities that are nearby are usually less-favorable than those that surround a Class A property.
Unlike the rest of the property types, these real estate properties require a substantial amount of maintenance and upkeep to begin functioning once more. Renovations to the internal and external functions and the visual appeal are usually always a must.
The upside to this is that Class C buildings are generally exceptionally cheaper than Class B and Class A buildings, and with enough maintenance and administrative features, these buildings can be brought back to life and provide a stable revenue source for investors.
Investing in Multifamily Properties with the Right Partner
Starting your real estate investment journey can be an exciting journey. Knowing where to begin and having the best first step into the industry is a foundational benefit that will set you on the right path to success.
We are an investment fund that assists our investors in receiving the tools and information that they need to succeed through the use of state-of-the-art technology and institutional-quality investment assets. Whether you are a new or experienced investor,
Our team provides you with the service and knowledge for better and more accurate investments. To start your multifamily investing that matters, contact us at 949-881-7128 at Saint Investment today!
President of Saint Investment Group
Nic is a two decade seasoned expert in investing and capital raising, specializing in Real Estate and debt markets. With Saint Investment Group, he leads large-scale distressed asset purchases and innovative syndications for investors.