With a housing market that is soaring in some cities and a stock market that is volatile at times, many are looking at investing in real estate. Typically, this means buying a single family home and renting it out while the value rises. Many are missing out on the benefits of multifamily real estate, which often can actually produce a better return on your investment. Here’s a look at why this might be the superior alternative.
4 Benefits of Investing in Multifamily Real Estate
- Lower maintenance costs: When you rent out a traditional house you will be paying to maintain things like a yard, garage and roof. With some multifamily homes like condos, your responsibility ends outside your door. This can make your obligations as a landlord easier and less expensive.
- Tax benefits: Duplexes are a good way to save on taxes and insurance expenses compared to single family home investments. Even though you are getting two rents with these properties, you will still only pay taxes for a single unit. Additionally, if you live in one section of the home there may also be tax benefits, since the building is your place of residence.
- Duplex investments are easy to start: There are usually higher down payments for buying investor properties than there are for residential properties. Some multifamily investments, like duplexes, will allow you to combine the two. You can buy a duplex and live on one floor while you rent out the other. This might mean that a duplex is a great first real estate investment.
- Location gets easier: You can really benefit from a smart investment in a hot city if the location is right. Renters will frequently pay a premium to live in an in-demand location. Investments like condos are a more affordable way to capitalize on this demand. In some cities there may not even be single family homes in these types of areas.
Investing in real estate can be a smart financial move for a portion of your wealth, but make sure that you are looking at every option. Don’t write off the potential benefits of multifamily investments when you make your final decision.