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Multi-family properties are a great investment

In the opinion of BHI Construction & Real Estate Development, real estate is the best way to grow wealth. If you want to get super-rich, get involved in real estate, by building it, owning, or designing it — but not just any real estate, multi-family properties in particular.

Multi-family homes, come in many forms including apartments, condos, duplexes, etc… But the main thing they have in common is that they pay you (the homeowner). It may not be a lot, it may be just enough to cover half of the mortgage, but it’s still something. The best multi-family home investments pay the mortgage as well pay the owner a profit each month.

Multi-family home investments have always done well but are expected to skyrocket over the next decade due to a number of key indicators including;

  • 75 million Baby Boomers are headed into retirement and will be downsizing for large single-family homes because the kids are out of the house. They don’t want to deal with the maintenance of a home or they simply want to travel more.

  • Many of today's apartment complexes may be converted to retirement communities in the future. That means get in now to be bought out by a larger developer later.

  • Many millennials aren't buying homes, they are renting.

  • It's getting more expensive to build new apartment units. The costs of land, permits, and many restrictive community covenants have made it costs prohibitive to build new buildings.

  • For many homebuyers, it's easier to get a loan on a multi-family unit than any other piece of real estate.

Buying a multi-family building lowers the risk for many lenders. If you have a building with 16 units, even if a couple of units are vacant, you still can make it work; the more units, the better.

Below is an example of how multi-family properties are a great investment:

Let’s say you purchase a 49-unit property priced at $35,000 per unit with an 8% cap (the return on investment based on the income a property is projected to create) for $1,750,000. If you pay cash for this deal at $1,750,000, you would make $140,000 free-cash-flow per year after expenses. If you took out a loan, with a $450,000 down payment and financing of the balance of $1,300,000, the debt payment would be $78,000 per year. This would still make you $62,000 cash flow per year. This cannot be done with a home.

Key Factors for Real Estate investing in multi-family homes:

  • Most communities cannot keep up with the demand for rental housing.

  • Rents never go down.

  • You can leverage the equity in the property to invest in more properties.

  • Income-producing properties provide excellent appreciation value.

  • There are tax benefits to be had with multi-family units not available for single-family homes

Contact for more information

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