There are many reasons to invest in multi-family residential real estate, particularly long term, buy and hold real estate.
With multi-family property, you can usually get in with a 20% down payment. If you’re going to be an owner occupant, you might be able to get in with an FHA mortgage, and only have to put 3.5% down.
So, if you bought a $150,000 duplex as an investor, you might only have to have $30,000 to buy it. With that FHA loan, you’d only need $4500! Plus closing costs, of course.
With other investments, say, mutual funds, if you wanted to buy $150,000 worth, you’d have to have $150,000 liquid to put into those funds.
If the property increases in value by 1%, meaning next year your building is worth $151,500, then your actual return is more like 5%. You’re getting an equity gain of $1500, and you only have $30,000 into the investment.
If you have a loan, then each month you make your payment, you knock down some of the loan balance. On a 30 year loan, if you held the building, and didn’t refinance, then in 30 years, it’s yours. No more principal or interest payment. Think of what your cash flow would be at that point!
Most investors want there to be at least some annual cash flow from their buildings. That makes sense. Green Light Real Estate can help you analyze an investment’s financials and look at the investment ratios so you have a good idea as to a likely monthly or annual cash flow.
Now, we’re not tax advisors, so you have to get those answers elsewhere. We can tell you that you may be able to deduct interest and expenses from your real estate investments. And you may be able to depreciate the building over a pre-determined depreciation schedule. Check with your tax preparer.