Multifamily Property - Red Pill Kapital Investments

Investing in the future is the smartest thing you can do now, considering the economy contracted for two consecutive quarters, the typical textbook definition of a recession. Although, the US is still not technically in a recession, as the National Bureau of Economic Research is the only body allowed to make that call (and they haven’t, yet…), the warning signs are there.

What can’t be ignored is that the economy is contracting while productivity is declining, so it’s best to prepare for the harsh economic days ahead. Because of the unpredictable economic behavior, this article will discuss how to invest in your future so you can ride through the hard times.

1. Create An Investment Plan

The first step to building a financially secure future is to create an investment plan. With such a volatile market, you need a guiding star to help you commit to the master plan and avoid panicked decisions. An investment plan lays down a strategy after gauging all the market variables. That way, you can recognize and weigh all the risks when investing, enabling you to fulfill all your obligations still. The plan should help you realize the best investment vehicles.

The key to creating a plan is to be realistic about what you can achieve. Note that creating an entire financial strategy for the future in one sitting isn’t going to work. Instead, break down each piece into smaller steps that are manageable and achievable. Once you’ve figured out the steps, write them down, so they’re easy to refer back to when needed.

2. Diversify Your Investments

As is often said, never place all your eggs in one basket. Diversifying is an excellent way to get the most out of your money, even in the most troubling economic slumps. It means spreading the investments across different asset classes so that if one class tanks, another will likely thrive. Markets you can try your hand at include:

A) Invest In REITs

Real estate investment trusts (REITs) are a great way to invest in real estate without owning any property. They’re publicly traded on stock exchanges and often pay out dividends from their rental income. In a risk-off environment such as the current one, REITs are typically the oasis of hope, and it’s easy to see why. REITs offer relative inflation protection and high dividends but bear a low correlation to the stock market and have low transaction fees.

REITs are excellent investment vehicles for the long term, typically outperforming bonds and stocks in some periods. If anything, REIT’s average yield is over 3%, more than double what you would earn from S&P 500 stocks. What’s more, REITs are liquid, so you can get your cash as soon as the market opens.

B) Home Flipping

You don’t have to own an entire rental property to reap the benefits of investing in properties. A neat trick to try is home flipping, which involves buying distressed properties at discounts, renovating them, and selling them for a profit.

C) Sandwich Lease

In this arrangement, you enter a rent-to-own agreement with a landlord, then lease it to a tenant. It’s one of the most cost-effective ways to enter into real estate, as the tenant will allow you to purchase the property after several years.

3. Concentrate On Marketing

Investing in your marketing strategy is one of the best ways to create a sustainable business. Marketing will boost sales and build your reputation, increase your relevance and demand, and cements your place among customers, creating a loyal customer base.

One of the most potent forms of marketing is digital marketing. The main way of doing this is through search engine optimization (SEO) using keywords. You target a range of words potential clients use when searching for real estate properties for Google to drive traffic to your online sites.

Digital marketing could take many forms, such as email marketing, blogging—which 56% of marketers say is effective, and social media. Posting content on social media is exceptionally effective considering 82% of Americans use social platforms.

Whichever form of marketing you settle on, you should try videos. According to Wyzowl’s research, 86% of marketers said videos helped increase traffic and generate leads, while 81% said they directly helped increase sales.

4. Automate Your Savings

Automating savings is a great way to ensure you always have money available for whatever comes up. The best part is you won’t even have to think about it as it works in the background.

It’s also a great way to start investing in the future. You can set up automated transfers from checking to savings and then start saving with every dollar. It’s easy, painless, and will save you money in the long run.

To automate your savings, use an app like Acorns or Qapital. These apps allow you to set up automatic savings plans, plan, and invest without making withdrawals at specific times as traditional banks do.

5. Start Investing In Yourself

Another great way to prepare for the future is by investing in yourself. There are many ways to invest in yourself, such as:

Go to class: There are many courses available online or at local community colleges that can help you learn more about real estate and expand your knowledge in readiness for the future. Most of these courses have classes on various aspects of real estate, including how to market yourself, use social media, and manage your finances.
Subscribe to emails from industry leaders: By signing up for newsletters from real estate professionals or companies, you’ll stay up-to-date on changes in the industry and what you can do to adjust.
Listen to niche podcasts: Podcasts are another great way to learn about topics related to your industry—not just real estate. There’s a ton of valuable information on marketing, management skills, and more.

The Bottom Line – Invest In Your Future, No One Else Has More Of An Incentive

Just because the economy is tanking doesn’t mean you must sink with it. Since business is low, now is the best time to invest in the future and realign your business so you can reap big when the market turns hot again.

Some of the best tactics you can employ include concentrating on marketing, investing in your knowledge, diversifying your investment portfolio, and automating your savings. Before you set out, you must create an investment master plan to guide you through turbulent times.

Now is one of the best times to become a multifamily landlord because apartment vacancies and interest rates remain low compared to a few years back. Private equity investors can also access a pool of lucrative debt capital.

What’s more, the White House notes that there’s a thirst for decent housing coupled with a chronic undersupply, leading to skyrocketing housing prices, as seen in the table below:

Statistics show that investors should expect a 6% net increase in their income for the coming year. All this signals that multifamily properties are a lucrative investment ripe for purchasing.

Suppose you are new to Commercial Property Investment and do not understand why you should invest in multifamily property. In that case, these are the reasons why this kind of property must be a part of your investment portfolio.

1. Increased Cash Flow

A higher cash flow is one of the biggest reasons to invest in multifamily property. Such properties are always in demand by rookies and seasoned investors alike.

You can expect a high occupancy rate if your property is in a strategic location. With time, this leads to increased monthly revenue.

One way to ensure you rake in good profits is to invest in different geographical locations. Doing so allows you to have multiple income streams from the same type of investment.

2. Easy To Manage

Managing 12 units in one multifamily property is more manageable than 12 single-family units spread out across the city. With the former, you can manage it or hire a property manager instead.

It is impractical and costly to hire 12 managers to manage single-family units. On the other hand, hiring a manager for a multifamily property makes sense because of the number of tenants you are dealing with under one roof.

3. Enjoy Tax Breaks

A multifamily property makes you eligible to enjoy tax breaks as a reward from the government for providing housing for city residents. The kind of tax breaks you enjoy depends on the property classification.

That’s because you can write off expenses from taxable income. In short, you can deduct repair, maintenance, and management expenses from the taxable income produced by the multifamily property.

4. Lower Investment Risk

This is not to say that multifamily properties do not come with risks–they carry some risks like any other investment. The only difference is that the risks associated with this kind of property are lower than single-family units, as the table below illustrates:

One of the risks you may encounter is the vacancy rate. Because you are dealing with several tenants at a time, the possibility of 0% occupancy is slim to none.

Suppose you have a well-maintained property with fair rental rates. In that case, a low occupancy is something you will rarely worry about.

Also, ensure you research the property beforehand, choose a good location, and market it well. Doing this will guarantee you a high occupancy rate.

5. Short-Term Leases Are Advantageous

Five years and more is the standard term for most commercial and retail leases. If the market changes, you are stuck with properties whose rent you cannot increase. With multifamily properties, the leases are shorter, typically lasting a year.

This means that you can raise rents quickly depending on market conditions and inflation. Shorter leases ensure your property stays lucrative in the long run.

6. Quickly Build An Investment Portfolio

If you want to delve into real estate full-time, this is one of the best ways to boost a portfolio quickly. Multifamily properties offer the chance to invest in multiple units without the hassle of managing several separate housing units.

Think about all the research, planning, permits, and cost it takes to invest in one property. Now multiply that by several units, and you know why a multifamily property is the best option.

Moreover, you’ll find it easier to purchase a multifamily property than buying a single-family unit.

7. Strong Rental Demand From Millennials

Data from the U.S Census Bureau shows that renting is the most common form of housing for millennials. Currently, the millennial generation is the largest in the U.S.

One reason why they find leasing a favourable option is the increasing cost of median home prices. This places homeownership out of reach for many. Also, millennials value flexibility and mobility over owning property.

Combined, all these reasons make millennials more likely to rent than own, spelling good news for multifamily property investors.

8. High Appreciation Rate/Value Retention

Multifamily properties continue to hold value even if you do not get immediate cash flow. The general rule for real estate is that it appreciates over time. With multifamily property, the appreciation rate is higher.

Sure, this is not set in stone. But the best way to ensure the property retains its value is to maintain and repair it often. Check for broken or damaged areas, mold, and more issues between tenants, and it will hold its value with time.

9. Better Financing Options

Data shows that multifamily investments have better funding terms overall than other real estate types. Understand that this investment type costs more initially, but it is easier to maintain than other property types.

Expect lower interest rates if you opt for a mortgage loan for a multifamily property. This is a relatively risk-free investment for first-time investors. Because of the high occupancy rates, financing institutes view multifamily properties as having lower risk.

10. Insurance Simplicity

Buying insurance for a multifamily property is relatively easy. Like financing, getting insurance is a simple process compared to other real estate types. Several factors affect how much a policy will cost.

However, the number of units in the building, amenities like a pool or rooftop terrace will raise the insurance cost. This is because tenants or visitors are more likely to injure themselves on the property. It would help if you also understood that insurance premiums for multifamily homes are rising.

Despite this, most insurance companies know how to cover multifamily properties in a way that favors you. Further, if you have several such properties, some insurance companies will grant you a “blanket” cover, insuring all the properties under one provider.

Final Word

Investing in a multifamily property is one of the best decisions you can make today. You can look forward to better cash flow, lowered risk, tax breaks, easier management, and a higher appreciation rate. Taking help of a property investment company can prove to be of greater help in terms of huge capital gains to fill up your pockets. Despite stiff competition and an initial high investment cost, a multifamily property is still an excellent investment opportunity.

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