Real estate is a widely popular alternative investment avenue. There are numerous reasons why one may choose to invest in real estate. While some may want to benefit from property appreciation and enjoy the source of consistent cash flow, others may aim at diversifying their portfolio and hedging against inflation. As Kanat Sultanbekov mentions, there are three most common avenues for real estate investing, which include multifamily real estate, single-family real estate and commercial real estate.
Kanat Sultanbekov marks the advantages of investing in multifamily real estate
A multifamily property essentially implies to a building or complex which has more than one residential unit. It is divided typically into a few different rental units, with a different tenant in each one. Each of these units is traditionally self-contained. As a result, they have their own kitchen, bathroom and so on. However, they may also have shared amenities such as outdoor space. The advantages of investing in multifamily real estate are many, including:
- Consistent, steady cash flow: One key factor attracting investors to the multifamily real estate market is its ability to offer a steady cash flow through the rental income received from tenants. This rental income is stable and is not likely to fluctuate on a monthly basis. Additionally, in favourable market conditions, it becomes feasible to renew leases and find new tenants promptly, ensuring the retention of high occupancy rates and, consequently, a reliable and consistent cash flow.
- Passive income: A good multifamily investment will provide passive income, in the form of monthly or quarterly cash flow from rental payments. While property ownership inevitably entails occasional maintenance tasks, a property management team can efficiently handle these responsibilities, thanks to economies of scale. Opting to own multifamily properties through a fund manager can especially help investors to enjoy passive income without much of a hassle. In this arrangement, the investment company takes on both the financial and time commitments associated with upgrading and maintaining a portfolio of properties, providing investors with a hands-off experience.
- Lower risk than other real estate investments: While all investments inherently involve risks, within the realm of real estate, multifamily properties are often considered to be the least risky. This is because there is a consistent demand for comfortable and affordable housing in proximity to schools and workplaces. In contrast, commercial real estate, such as retail and office buildings, is more susceptible to economic shocks, making multifamily real estate comparatively more resilient. Another factor that lowers the real estate investment risk is that multifamily property owners have more than one tenant. If one has a single-family home and their sole tenant decides to move to a different state for a new job, 100% of the future income from the property would rely on their ability to source a new tenant. On the other hand, if an investor owns an apartment building with four units, one tenant leaving would lower their income by just 25%, till they find a new tenant.
As per Kanat Sultanbekov, for many investors, the very first multifamily property they acquire tends to often become the launch pad for a property empire. After all, multifamily real estate investing is relatively easy to scale.
