Investing in properties that generate an income has many advantages for investors seeking to start creating wealth through real estate. More specifically, purchasing small muti-unit income properties (typically ranging from 2-4 apartment units each) is an excellent way to begin building an investment real estate portfolio. Especially with the right property management company in place this investment strategy can be one of the strongest strategies for wealth creation and hands-off income generation. Because it allows you to leverage your time so well, this strategy works particularly well for those who are currently working full time.
Small multi-unit income properties
Many real estate investors get started with a focus on single family homes. This is often because this is the type of housing that they are most familiar with. When you take a look at the distinct advantages to an investor that small multi-unit income properties represents, you will understand why smart investors know this is one of the safest and best approaches to getting started in real estate.
Cash Flow
Cash flow is the key component in any beginning business venture. You must make sure that from the beginning, your business can generate cash flow to keep you sustained. Cash flow is often non-existent or negative with single family homes, but due to the economies of scale with a small multi-unit property, you will be able to find cash flow opportunities very easily. The main reason is because you are only buying one plot of land and one building, but the building is subdivided and generates multiple rental streams. In addition, your cash flow has less risk since you will not run the risk of losing 100% of your income for part of the year if your tenant moves out.
Investment Efficiency
Your time is valuable and searching for investment properties and going through the mortgage financing and property closing efforts can stretch out for months. By gaining from the economies of scale with a small multi-unit building, you get a more efficient investment regarding the time involved, per rental income generated. You will also find that there is much less competition for these types of buildings and no home-owners will be driving up the prices of the properties.
Management Efficiency
Since you have more units under one roof, the management of your properties is more efficient. You can focus on making sure that one building is well-maintained instead of your attention being spread across three or four different houses. Also because of the bigger cash flows, you can more easily hire a property management company to handle all the management aspects. Because property managers seek the efficiency that goes with multiple apartment units under one roof, there are much more professional property managers that will manage these types of properties versus single family homes.
Appreciation
You can generate significant increases in property price just by improving the management operations of the building. Income property is valued with a lot of emphasis on the income it generates. Therefore if you purchase a property could use some cosmetic improvements, could be marketed to tenants better, or has stale, low rents from long term renters, you will find that your creative ideas and fresh approach can greatly increase the rents of the apartments and thereby significantly increase the property value.
Right Approach for the Current Real Estate Market
Due to the major downturn in the real estate market, the purchase prices for property is down very low. Rents have stayed stable, which means that this creates an excellent scenario for generating income and cash flow. The market is now stabilizing at the bottom and is poised for future increases. Establishing a portfolio of income producing multi-family properties is an excellent way to establish a sustainable and growing portfolio that will allow you to ride the wave as property prices begin to rise.
Next Steps
After reading dozens of books and courses I made my start in real estate investing with multi-unit income properties and have never looked back. My investments have allowed me to weather the perfect storm in the real estate market and the economy and I am very excited about the great investment opportunities that the current market conditions now provide for.
If you would like to gain more information on the inside strategies and tactic of creating wealth through investing in small multi-unit income properties, please submit your email in the form below. With the right strategies you can learn how to go from zero to $1.5M in real estate investment assets in just two short years, like I did, without tapping into any savings.
Gain access to learn the following:
- Financial metrics to compare and select the right income property
- How to finance your multi-unit income property purchase
- Specific strategies for choosing the right neighborhoods for investment properties
- Creative methods for coming up with the down payment
- How to select the right property management company or put the right systems in place to make managing the property a breeze.
- How to make sure you have rock solid asset and liability protection for this business venture.
- How to make the most of the lucrative tax advantages associated with your real estate investment business.