Focusing on Multi-Family Houses for Higher Cash Flow from Real Estate Investments

Many people are keen about investing into multifamily housing properties. They keep on asking whoever they can about the topic. To keep it simple, let us get one thing straight right at the beginning. Yes, investing into multifamily properties is a great idea! However, before explaining the answer in details let us field a question here. Ideally, what is the best strategy to invest into the land and building sector? Or, we can put it differently – how does one distinguish properties that are ideal to invest into?

As the experts will agree unanimously, cash flow quotient of any building is the most crucial factor to consider before investing into it. Buildings with positive cash flow are obviously ideal option for investment while those with negative cash flow quotient should be avoided at all cost. Rookies investing into the sector happen to overlook this clause and end up purchasing the wrong buildings and suffer financial loss in the process.

Now, multifamily buildings provide higher cash flow as compared to single-family homes. When a tenant moves out from a single-unit property, the cash flow for its owner remains suspended as long as a new tenant moves in. Contrastingly, when one family moves out of a building that houses say, 6 families the cash flow of the owner does not dry up completely, rather it only gets somewhat trimmed. In such instance, rent from the other 5 occupied residential units keep generating on a regular basis.

Secondly, it is much easier to maintain a multifamily building. Let us consider a person owns 4 single-family units at four different locations in the city. In contrast to that, suppose you own a multi-family building, which has four units. As your property is under a single roof, it is easier to maintain as well as to renovate. In contrast to that the other person requires to resolve logistics and other issues to cope with his string of properties scattered across the town.  The person has to replace four roofs and get four lawns mowed. Thus, the renovation and maintenance costs for multifamily houses prove to be more economical for obvious reasons. In fact, the more units under a roof the safer the building is for investors.

For any serious investor, it is of paramount importance to learn how to invest in multi-family apartments. A lot of helpful resources are readily available across the internet these days. Multifamily houses usually have greater resale value and larger number of interested buyers. The category of properties is appreciated on a regular basis as compared to single-family houses.

Commercial Real Estate Properties & the Various Lease Options

Real estate properties can be divided into three categories, which are as following.

• Residential properties – used for living purposes
• Industrial properties – used for manufacturing and production purposes and
• Commercial properties – used to run commercial establishments like office parks, shopping malls, restaurants, gas stations, office towers and convenience stores, etc.

Businesses that run on a commercial real estate property usually take the space on lease. As such, investing into commercial realty properties is an appreciable enterprising idea.

There are various options to lease out commercial real estate properties. Each of these options defines different degrees of responsibility from both the landlord and the tenant. In a single net lease option, the tenant requires to pay the rent and foot the bills for property taxes as well. In double-net option (NN), tenant pays the insurance in addition to footing the property tax bills. In triple-net lease option (NNN), the tenant foots the maintenance bill in addition to insurance and property taxes. In contrast to these leasing options, a gross lease allows a tenant to pay only the rent and all the relevant expenses are shouldered by the landlord.

In contrast to residential properties, investing into commercial buildings and spaces require considerable amount of startup capital. Moreover, sound knowledge on various legal and regulatory matters also comes in handy while investing into this particular real estate domain. People who prefer avoiding these challenges can seek service of proficient real estate investment trusts or, REITs. However, for any enthusiast investor it is always better to have hands-on knowledge on this aspect and learn how to invest in commercial real estate.

Investing in commercial real estate often requires a considerable amount of startup capital and extensive knowledge of the legal, financial and regulatory aspects of owning this type of properties. Investors who don’t want to deal with these hassles directly can manage their properties through real estate investment trusts (REITs). Rate of appreciation for commercial realty properties is usually much higher than their residential counterparts. Thus, owners make substantial amount of money on selling these properties.

However, strategic location is the fundamental factor to decide the economic viability of any commercial real estate property. Any competent entrepreneur invests in commercial real estate for cash flow. The category of buildings generates substantial income through rents collected from tenants. If these investment portfolios are handled carefully, these can be ideal tools to usher in wealth and prosperity.

An Introduction to Commercial Real Estate Investments

Most people, who invest into the realty sector, start out by putting their money on residential properties. A thick number of investors actually follow this trend because of a peculiar reason. As because these people are more accustomed to purchasing homes that, they do not think about commercial properties while making a new investment. However, on the practical scenario, purchasing commercial assets along with residential properties, across the realty sector, proves to be a great way to balance and diversify one’s investment portfolio. This is actually great way to minimize risk as well as to rake in greater dividends.

Before investing into commercial realty properties, however, it is crucial for everyone to get certain things sorted out. As such, residential and commercial properties across the real estate sector have certain differences. In the process to learn how to invest in commercial real estate, it is relevant that one masters these differences clearly.

Residential and commercial properties are valued differently. The valuation of rent or price of any commercial property is solely dependent on its per square foot usage. On the other hand, valuation of residential properties is not always calculated by this formula. Unlike the residential buildings, commercial buildings help diversifying the risk to a considerable extent. Suppose, someone owns an apartment building and one out of the ten tenants vacate the apartment. In such circumstance, the owner looses only one-tenth of his income for the time being and not the entire rent amount. Whereas, when one invests into single-family house, after the tenant moves out the entire rent is lost until someone else moves in.

As such, lease or rent for commercial buildings in much higher as compared to the residential ones. Thus, the cash flow is much higher with commercial properties. Even lease period for these properties is usually much longer. This proves helpful for the owner to stabilize his/her cash flow. Even banks value commercial properties differently as compared to the residential ones.

However, there is a common notion existing around the society. Most people think, commercial properties never go into foreclosures. As such, this concept is not correct and commercial properties do go into foreclosure. Before investing one’s hard-earned money into any commercial property, it is, therefore, being suggested that investors should do a lot of spadework before putting in the money.