Top 7 Reasons to Invest in Multifamily

Reason #1:  Bigger Deals = More Profit

We have a saying in the commercial real estate investment world, it takes just as much time and effort to close a $100,000 deal as it does to close a $1,000,000 deal.  As an investor, you should consider investing in multifamily as a way to optimize the use of your time and effort as you build your portfolio.  It takes a lot of time and effort to close a deal of any size.  Why not close bigger deals?  If you can make a 20% profit on a deal, that’s $20,000 on a $100,000 single-family deal, or $200,000 on a $1,000,000 multifamily deal.  Bigger Deals = More Profit.

Reason #2:  More Rental Units = More Revenue

As a single-family investor, why do you want to keep investing?  Well, you want to increase your portfolio size and continue to earn more revenue.  You can do this one house at a time, building your portfolio steadily over the years.  This is not a bad strategy.  But, if your serious about increasing your revenue as fast as you can, you should really look at investing in multifamily.  You can do just ONE deal and add 5, 10, 25 or more rental streams.  More Rental Units = More Revenue.

Reason #3:  More Rental Units = More Stability of Income

This benefit may not be so obvious, but when you think about it, it will make a lot of sense.  If you’re a single-family investor, and you own four houses, and by a stroke of bad luck two units go vacant at the same time, you’ve lost HALF of your income stream.  Just two vacancies and you could be in trouble.  If you’re a multifamily investor and you have a portfolio of 20 units, those same two vacancies represent only 10% of your units, and you’ve likely got enough cash flow from the 18 units that are occupied to cover your expenses.  More Rental Units = More Stability of Income.

Reason #4:  More Renters Today = Higher Demand for Multifamily

With increasing housing prices and increasing interest rates, we expect to see an increase in rental demand as those being priced out of the home ownership market will continue to rent.  Additionally, younger people looking for their first home will likely be renters, increasing the pool of renters.  More Renters Today = Higher Demand for Multifamily.

Reason #5:  Get More Rent and Do Fewer Deals

Time is one of our most precious commodities.  Some investors are holding down full-time jobs while trying to develop a portfolio that allows them enough financial independence to give up their day job.  Other investors have multiple deals in the pipeline and are busy beyond belief.  Why not consider getting more units each time you do a deal by investing in multifamily?  If your time allows you to close 3 deals in a year, if your doing single-family, your getting 1-4 units each time you close.  If you transition into multifamily, at 5+ units per deal, imagine how quickly you could grow the number of units that you own?  Get More Rent and Do Fewer Deals.    

Reason #6:  Multifamily is the Easiest Commercial Loan for which to Qualify

As a single-family investor, you’ve gained experience dealing with people renting property in which to live.  Multifamily loans are a good entry point for new commercial real estate investors expanding beyond single-family rentals.  If you’re an experienced single-family investor, this experience is viewed by lenders as applicable to multifamily and the next logical step for someone growing their portfolio.  Multifamily is the Easiest Commercial Loan for which to Qualify.       

Reason #7:  Better Opportunity to Increase Value Significantly

How is property value affected by the income?  Savvy investors know that it’s by using the Cap Rate. 

Property Value = Net Operating Income / Cap Rate      While we don’t control the Cap Rate where we invest, we do have the ability to increase rents or lower expenses, both of which lead to an increase in Net Operating Income (NOI).  This increase in NOI results in higher Property Value.  Our ability to increase Property Value is magnified by the number of units upon which we are able increase NOI.

  • SFR – raise rent $100 per month on a house at a 10% cap rate, increase value $12,000
  • MF – raise rent $100 per month on 12-unit complex at 10% cap rate, increase value $144,000

Multifamily investing provides a Better Opportunity to Increase Value Significantly.

Now that you’ve seen the top 7 reasons to invest in multifamily, you now understand why multifamily is such an attractive asset class for new and experienced investors alike.

Malcolm Turner


ABOUT US:  Castle Commercial Capital is a nationwide commercial mortgage lender for real estate investors and business owners located in Southfield, Michigan. We specialize in bridge loans for FAST CLOSINGS, long-term rental loans for PERMANENT FINANCING, and SBA financing for business owners looking to grow their business.

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