When it comes to real estate investing, you’ve got a plethora of options you can use to net the income you’re looking for. One of the most popular assets we see people invest in is multifamily real estate.
Not only is multifamily real estate used by those who invest with their own capital or other funds, our clients use their self-directed IRAs to invest in these assets. The returns can be quite lucrative when you invest in the right property, have steady tenants, great amenities, and eye-catching curb appeal.
Top 4 reasons our clients invest in multifamily real estate
1. Greater cash flow
The more units you have rented out, the more cash you have coming in on a monthly basis. All income is deposited directly into your IRA on a tax-sheltered basis (another score!), which provides two benefits: more cash to reinvest and funds to cover any maintenance issues.
Additionally, multifamily housing units rarely face the possibility of all units being vacant at the same time. Not so with single-family homes. You lose a renter in a single residence and any monthly income comes to a screeching halt until you’re able to rent it out again.
With multifamily investments, you have multiple streams of income, not just one. You may have some units vacant for a while, but you have numerous others that are continuing to generate that cash flow.
2. No vacancies
Ok, so, “no vacancies” isn’t exactly true. But, depending on the location and desirability of your rental property—empty units tend to fill up quickly. Everyone needs somewhere to live, and many people either can’t afford a house or prefer condominium living. A well-kept, attractive, and safe establishment can keep those vacancies to a minimum.
If you continually upgrade the property—whether you add a workout gym, individual storage rooms for each unit, or a safe laundry mat area—you’re more apt to attract tenants for the long haul.
3. Convenient to maintain
You don’t have to drive all around town to check on different properties—your multifamily property is all under one roof at one location. And, while you may have multiple individual units to maintain with separate issues to contend with (like leaky sinks), it’s much easier to keep an eye on one building as a whole than it is multiple properties.
You’ve got one building with one roof sitting on one property that may or may not require landscape management! One location dramatically cuts the time it takes to maintain your investment and can actually be less expensive to maintain, all things considered.
4. More bang for your buck
Remember our mentioning of multiple streams of income in the beginning of this article? That’s because multifamily property typically has more than one or two tenants at a time. For example, a condominium versus a duplex. Multi-units also add value to the cost of the property overall if you choose to sell.
When you sell a single-family home to another investor or individual, well, that price is based on the value of the property and structure on it. Multifamily real estate takes into account the profits the property is generating, as well. And, more units equal more income! So, depending on the number of tenants you have, if your property is in a good location, and has been well maintained, you could net a pretty nice return when you sell.
These are all things to bear in mind whether you invest with personal cash for immediate income or with your IRA funds to grow income for retirement. Of course, there are considerations—such as more people to deal with, multiple possibilities for plumbing issues, leaks, etc. Some may consider that more of a hassle than it’s worth, but that all depends on your objective. Multifamily real estate is definitely worth looking into and can be the right fit for experienced or new investors.
If you have questions about this article or want to know more about how multifamily property and other real estate investments work in a self-directed IRA, please contact us at 800.425.0653 or email [email protected]