Are you interested in buying an investment property with monthly income potential? One common option is to look at the benefits of a multi-family property. This can certainly be a strong investment decision, particularly for those interested in generating consistent cash flow. But there are also risks a potential investor should bear in mind.
What to know before investing in multi-family properties
The potential rewards
Buying a multi-family property remains a popular way to invest in real estate, particularly in urban areas with high demand for rental units.
In popular European markets steady rents has made now a good time to invest in apartment properties. Indeed, cash flow is a prime reward for those choosing this investment route, even more so than equity appreciation. For some other investors the most important reason investing in a multi-property is the increasing value.
In comparison to a portfolio consisting of multiple individual properties in different cities, a single multi-family property can be easier to maintain. You’ll only need a single property manager, whether you're buying houses or properties with more units.
Potential tax benefits
In many cases you could benefit from tax incentives when investing in a multi-family property. By providing city residents with affordable housing, you can deduct many costs of running and maintenance. This will depend on the complex’s size, condition, location and whether it qualifies as commercial or residential, so be sure to hire a competent CPA to assist you.
The potential risks
While there are many potential perks to investing in multi-family properties, it’s vital to also consider the flip side to see if it fits into your long-term strategy.
Development of real estate value
In 2017, interest rates in Europe are lower than ever before. Currently there are no signs for a change of that situation in the new year. Risks for investors are thus manageable and the return rates are promising. But there are some more criteria crucial for the price development of apartment buildings. Supply and demand of the investment object's respective location are especially significant. Metropolises such as Munich, Barcelona and Paris are very much in demand which increases their factor and lowers their net return.
The property's condition will also affect the return. When buying a new high quality property, the purchase costs may be high but you will save expensive renovations in the near future. When investing in a multi-family home, many different factors are adding up, making it a complex endeavour. We're glad to advise you individually in your property investment.