5 Reasons You Should Invest in a Multi-Family Commercial Property… Now Wednesday, March 01, 2017
Considering an investment in commercial real estate? Want to build a successful portfolio with an attractive rate of return? A multi-family property may be a solid investment option for you.
Jones Lang LaSalle, a financial and professional services firm specializing in commercial real estate, recently published a report on CRE trends. This report indicates that the market for multi-family commercial properties is growing, boasting record U.S. sales of $150.3 billion for 2016. So, what are you waiting for? Below are five reasons why you should consider an investment in a multi-family commercial property.
Financing is Easier to Obtain
Securing a loan for multi-family real estate is surprisingly easier than it is for a single-family home, even though the former can be much more expensive. Lenders will often consider the property’s potential for making money rather than basing their decision on the buyer’s credit. Because multi-family properties generate a strong and steady cash flow, they are considered a lower risk investment.
If you’re not convinced with the above, consider this example: You have twelve tenants in your building, but one decides to vacate their property. That loss only equates to approximately 8 percent of your total occupancy; having a larger group of tenants within one property reduces your overall risk. Compare that to a single-family dwelling where losing a tenant may cost you 100% of your income for one or two months, until you find a new tenant; it could also drop your yearly profit down to zero or even put you at a loss.
Faster to Build Your Portfolio
It’s much easier to acquire twelve units in a multi-family commercial property than it is to buy twelve separate single-family homes. Rather than obtaining twelve property appraisals, organizing twelve inspections, securing twelve loans, and possibly working with twelve different agents or homeowners at various locations, you can purchase a twelve-unit multi-family building and focus on each aspect only once. By acquiring one or more multi-family properties, you will save time, energy, and money; not to mention that you will quickly build a significant, income-generating commercial real estate portfolio!
Cheaper and Easier to Manage
Multi-family commercial properties have a smaller cost per unit since they have many shared services and features; thus, resulting in lower expenses and a positive net monthly income. Repairing and maintaining one property with twelve units is much easier and cheaper than doing the same with twelve separate houses. This gives you more opportunities to update the property and increase its value. With a better cash flow, you’ll also have extra funds available to hire a property management company. A property manager will take care of many property-related tasks for you; you’ll now have extra time to evaluate other investments and continue to grow your real estate portfolio.
Higher Potential for Appreciation
Ensuring that your property is well maintained and offers amenities that will attract and retain ideal tenants. Doing so will allow you to raise rental rates and fill vacancies quickly. Making upgrades, such as adding security cameras, laundry rooms, and usable communal living spaces, gives you the opportunity to positively impact many tenants. Doesn’t it make sense to invest a relatively small amount of money to increase the satisfaction of multiple tenants while growing the overall value of your property? Additionally, certain renovations, such as updating the building exterior, only need to be done once for a multi-family property, rather than many times for each single-family property.
Maintaining your property to a high standard and securing a strong cash flow gives your multi-family property greater potential to appreciate over time. This translates to increased equity when you decide it’s time to sell.
Demand is High
Multi-family properties are in high demand, and the sector is forecasted to grow.  What is driving demand? First, Baby Boomers are retiring or preparing to retire, which is causing a vast influx of tenants into the multi-family market. With their children finally leaving the nest, Baby Boomers are downsizing in favor of a smaller space. Also, there is still a high percentage of Millennials who are not buying homes because they are either unable to afford them or choosing to invest their money elsewhere. Rental properties and condos are appealing because they offer updated amenities, higher-quality conditions, and added conveniences.
Are you ready to make your next strategic investment?
As an industry leader in the commercial real estate market in Columbus, Ohio and Central Ohio, The Robert Weiler Company continues to take part in the growing multi-family housing trend. It’s one of the reasons why we made a significant investment in HighPoint on Columbus Commons in Downtown Columbus; and why we continue to make strategic investments throughout the region. As urban populations increase in density and priorities are shifted to preserving or developing more green space and better public transportation, we anticipate continued growth in this area. Our commercial real estate experts look forward to discussing multi-family properties that could be a profitable investment for you; reach out to us at 614-221-4286.
- “U.S. Multifamily Investment Outlook | Q4 2016” from JLL®; retrieved on February 28, 2017: http://www.us.jll.com/united-states/en-us/research/capital-markets/commercial-real-estate-investment-trends/multifamily
- “Multifamily 2017 Outlook: Positioned for Further Growth” from Freddie Mac Multifamily in January 2017: http://www.freddiemac.com/multifamily/pdf/mf_2017_outlook.pdf