Why do you want to invest in real estate? This simple, but often difficult-to-answer, the question is at the crux of how you will venture in the real estate world. Not only will it determine the type of risk you are willing to withstand, but it will also guide you in the type of properties you will pursue. This blog will lay out three key benefits of best real estate investments for passive income, both single-family and multifamily assets.
Single-Family Homes:
Single-family properties are a great way to get started in real estate. Below are a few reasons why you should invest in this asset class:
Lower Barrier of Entry
Unless you are investing in a multi-million dollar property, single-family homes typically require a relatively lower amount of your own capital to purchase. The likelihood of qualifying for a mortgage is also higher since you won’t need to deal with commercial real estate loans that come with added requirements and nuances. Additionally, since you will only be dealing with one unit, the amount of maintenance required for the property will be lower leading to more money saved in your wallet.
Easier to Rent and Sell
The U.S. Census noted that there was a 31% increase in single-family home rentals from 2007 to 2016, with this increase in demand expected to continue. When it comes to selling your property, lower purchase prices are attractive to potential buyers. You would also have the luxury of working with a wider buyer pool, as you will be able to market this opportunity to both traditional buyers and real estate investors.
Multifamily Properties:
The multifamily asset class is the best real estate investment for passive income that provides potential investors with plenty of upside. Here are three reasons why you should consider investing in this type of property:
High Cash-Flow
Since you will be dealing with multiple units and tenants, you will be receiving rent from many different directions. The higher levels of monthly net rent revenue will lower the impact of tenants that aren’t paying rent on time since you will have cash on hand to cover the necessary costs. Also, you could consider living in one of the units, lowering the overall amount you would be spending on housing any given year.
Appreciation
While appreciation in single-family housing is highly correlated with market demand, in multifamily you would have more control over increasing the value of the property. As the investor and landlord, you will have the ability to force appreciation on the property by renovating units and updating building specifics like the roof or common area. The market will still come into play when determining the selling price of the property, but the ability to make improvements at a larger scale will certainly help you elevate and control that dollar amount.
Economies of Scale
If you intend to build a multi-unit real estate portfolio, going the multifamily route will help you achieve this goal more quicker. Think about it – when you buy a property in this asset class, you will essentially be owning a significant number of units of real estate immediately. The ability to scale rapidly is, in my opinion, the greatest incentive to invest in multifamily properties.
So, why do you want to invest in real estate? Is it to achieve higher cash flows, or are you a new real estate investor looking to gain experience in this realm? The choice of going the multifamily or single-family route is completely up to you, but you will need to understand the ins and outs of each asset class to make an informed decision. To help you, please be in the lookout for blog posts on the cons of each of these types of real estate properties and the importance of market research.
Conclusion
At the end of the day, only you can determine whether real estate investing is right for you. As a starting point, think through your personal circumstances and the aforementioned considerations. Know that every investment strategy will be different, that each investment strategy has its own pros/cons, and that all investing carries a risk so as you continue to gauge whether you should invest in real estate, do your proper due diligence.
Investing in Real Estate comes with several advantages. Navigating the real estate investing process can be difficult, but you do not have to do it alone. We are here to help.
How You Can Get in On the Action
Cash Flow Champs is a privately held investment company that focuses on acquiring and managing opportunistic and value-add multifamily real estate properties. The company specializes in repositioning well-located assets in emerging markets surrounded by positive demand drivers such as population growth and job growth.
Cash Flow Champs partners with entrepreneurs and busy working professionals interested in investing in real estate but who lack the time to navigate the process. Alongside our partners, we aim to bridge purpose and profits in a manner that allows us to improve the lives of the residents in our communities and the neighborhoods where we operate.
In the words of Robert Kiyosaki, the poor and the middle-class work for money. The rich have money to work for them. If you are an individual that wants to build and maintain generational wealth through real estate, all while making a positive impact on the lives of residents and the communities where you invest, we’d love to explore opportunities for synergies.
Schedule a brief call with us so we can get to know you better, understand your life goals, and determine where synergies may exist.
This information presented on this site is for informational purposes only and does not constitute an offer or solicitation to sell shares or securities in the company or any related or associated company and is not a recommendation to pursue a specific investment opportunity. Any such offer or solicitation will be made only by means of the company’s confidential Offering Memorandum and in accordance with the terms of all applicable securities laws and other laws.
