Investing in real estate is one of the most lucrative ways to earn a relatively passive income. In particular, multifamily housing offers the most benefits as you look to diversify your investment portfolio. If you’re looking at investing in the long-term, you have to look beyond stocks and bonds. Stocks lose as much as 30% in the average recession, which makes it hard to keep your head above water.
Multi-family housing, on the other hand, provides an opportunity for growth and wealth. According to CBRE, multi-family housing investors earn an annual total return of 9.75%. This makes it one of the top real estate investment options available today.
Why invest in multifamily housing for the long term?
Low Vacancy Rates
High occupancy rates are the number one reason to consider multifamily housing investments. The average multifamily vacancy rate, according to CBRE is still just 4.5%, which is lower than the normal average of 5.1%.
If you want to truly offset your risks, invest in multifamily housing developments in different geographic areas. You’ll offset the higher vacancy rate in one area with a lower vacancy rate in another area. It’s like diversifying your stock portfolio with high risk and low risk stocks.
High Cash Flow
Multifamily residential construction is less costly than single-family home construction, when looking at individual units. The lower the costs, the less you have to borrow. Plus multifamily units often cost less to operate, repair, and renovate, making it a more affordable investment for all involved.
All of these lower costs translate to higher cash flow and or higher monthly net revenue. With the lower costs, you may also be able to diversify your purchases geographically, further diversifying your risk during economic downturns.
Multifamily housing units are in high demand over all generations, not just first-time homebuyers. Young couples, older couples, and parents looking to downsize all turn to the benefits of multifamily units that are affordable, require less maintenance, and provide the security they need.
When you’re looking for passive income, you may not think about real estate investments since they do require upkeep and management. However, overall, they require less work than a business or job you’d have to attend every day.
Multifamily units make managing multiple units much easier as they require less time and money. You don’t have to travel far or deal with multiple contractors to repair or renovate the units – everything is in one location, making it easy to cut costs and increase your cash flow.
If you’re looking for financial freedom, consider multifamily investments. Real estate doesn’t fluctuate as much as stocks and overall it has a higher cash flow, giving you greater annual returns year over year. Of course, any investment, including real estate has its risks, but with the right research and analysis, you can find the real estate that helps you realize the financial gains you hope to achieve.
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