The commercial real estate market is a fluid world, with markets shifting quickly, and investors making smarter decisions since the recovery from the 2008 crash. One aspect of the market that is on the rise, with no downturn in the near future, is multifamily properties. But why are multifamily properties such a good investment?
Multifamily Properties Have Higher Revenue Potential
Having a single family rental home is a good investment, but only if it is occupied. The one property, one stream of revenue is great, when the property is in between tenants, it can cause a huge strain on cash flow. Multifamily rentals, on the other hand, can give investors a minimum of two streams of income (as with a duplex) on up to medium and large apartment complexes. And when a tenant transitions out of a rental, there is still at least one stream of income from the other residents, offering a financial buffer.
Multifamily properties have a number of tax benefits offered at city, state, and federal levels. First, many cities and states have tax incentives for commercial real estate investors who are willing develop multifamily properties to bring up the overall value of an area. On a federal level, there are tax breaks for investors who have owner-occupied rental properties. There are also itemized deduction such as payment on leased equipment used to renovate a property that can be listed as well.
The Single Family Market is Completely Saturated
After the crash of 2008, families were looking to rent homes instead apartments because the rental rates were great, and single family homes offered the ideal benefits of owning a home, without being cost prohibitive. Unfortunately, it took only a few years for that market to become completely saturate, and now investors have a hard time offering competitive rates without eating heavily into their own revenue. Multifamily properties are booming right now, with no sign of slowing down. Depending on location and features, rental units can be as high as single family homes. People are streamlining their lives, and want easy access to shopping, schools, work commutes, and entertainment. Multifamily rentals offer that plus the sense of community. People want convenience and safety, which makes the new wave of multifamily rental properties consistently profitable investments.
There are a number of financing options available for commercial real estate investors looking to purchase multifamily properties. CMBS Conduit Loans, SBA 504 loans programs, mezzanine financing, hard money loans, and even self-directed 401(k) accounts can be used to finance multifamily property investments. If you are considering purchasing multifamily properties, and would like to learn more about the financing options available, contact Abel Commercial Funding at 301-200-9801. Our team of experts will work with you directly to come up with the best strategy and financing for your commercial real estate goals.