What residential investors need to know about the lucrative multifamily market
Thanks to economic growth in the Orlando region and beyond, the 100Units.com team has been encountering more and more residential investors who are interested in commercial real estate opportunities.
With recent market uncertainties looking set to continue, it can be a smart move for investors to diversify their portfolio. If you’re a residential real estate investor, keep reading as we explore how you can unlock incredible earning potential with a commercial real estate investment.
What is classed as Commercial Real Estate (CRE)?
Commercial real estate encompasses a variety of different building types, including:
- Retail buildings
- Office buildings
- Industrial buildings
- Multifamily properties (usually 5+ units to qualify as CRE)
- Apartment buildings
- Mixed-use buildings (often consisting of retail, office and apartment)
For the purpose of this blog, we’ll focus on multifamily properties and apartment buildings when we talk about commercial real estate.
Why should you consider a Commercial Real Estate investment?
While there are pros and cons to both residential and commercial real estate investments, there are some key considerations you should bear in mind when making your decision.
- More earning potential
More units means more tenants, which means more money flowing into your pocket. By increasing rents over time and keeping your expenses under control, you have greater potential to add value to a commercial real estate investment than you would with a single family property.
- Market resilience
Instead of being determined by current market conditions, the value of a multifamily asset is normally calculated as a multiple of the potential rental income. Therefore, the value of a multifamily property is generally less dependent on the health of the real estate market, meaning it can be a more resilient option than a single family home.
- Hands-off returns
Professional property management can often seem like a very expensive line item for a single family home. With a multifamily property of 5+ units, you’ll pay a lot less per unit for a property manager—with the added benefit of freeing up more of your time to spend on other ventures.
Multifamily Properties vs. Single Family Homes: Which is the best investment?
Which real estate investment is right for you?
Our advice: the investment you choose comes down to your long term goals, your tolerance to risk, the amount of capital you have available, and how hands-on you want to be with your investment.
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