Many investors have taken the recent news about the shaky stock market as a reminder to diversify their portfolios and seek alternative ways to grow their hard earned capital. While there are many different options for investment portfolios, one of the best choices for growth that isn’t tied to the stock market is: real estate.
There are a multitude of ways to invest in real estate, but investors seeking tangible assets typically choose one of these three options:
- Single Family
Each of these types of real estate has their own unique advantages and disadvantages, and it is important to know what they are so you can choose the right type of real estate for your investment goals.
Commercial Real Estate
Commercial real estate investing is a popular choice because of the high potential returns and regular monthly income through leases. Commercial properties can vary greatly in size and industry, and can include office parks, industrial complexes, or retail businesses.
While the profits and rents can often be quite high with commercial real estate, it also represents one of the largest downsides associated with this type of real estate. The entry cost can be significantly higher than for single or multifamily real estate, and commercial real estate is often heavily tied to the local economy. Businesses need to have the right conditions to remain open, and if those conditions don’t exist in the area it can make for extended vacancies.
In terms of management, commercial properties are typically in use during common working hours. When maintenance is required, the owner will likely get a call during the day and not the middle of a Saturday night as they might with other types of real estate. Also, it is worth noting that as one tenant vacates and another moves in, much more work will be required compared to single or multifamily real estate. Tenant improvements are a huge factor in gaining new tenants, and businesses will often need to customize the facility to meet their needs.
Multifamily Real Estate
Multifamily real estate comes in many shapes and sizes, ranging from apartment complexes with hundreds of units, to smaller multiplexes with ten units or less. Investors often value these multiple “doors” as they provide numerous income streams and an extra layer of diversification. It is unlikely all vacancies in a given apartment or multiplex will happen at the same time, thus cash will continue to flow in from the rest of the units.
Similar to commercial real estate, the upfront costs for owning multifamily real estate can be high. While the higher volume of tenants can be seen as a benefit, it also comes with additional management duties. Each one of those tenants requires attention, maintenance, and each time a tenant moves out, work will be required to make sure the unit is ready for the next tenant. On the upside, all of these units are either located under the same roof or within very close proximity, which makes for easier maintenance and repairs.
While multifamily real estate can provide diversity through multiple “doors” to collect rent from, it is also still very limiting in the sense that all the doors are in the same place. This could have adverse effects if the local economy has a downturn or real estate market conditions shift in that area. Essentially, all the investor’s eggs are still in the same basket.
Single Family Rentals
When compared with multifamily and commercial real estate, single family rentals offer the most flexibility. Prices for single family rentals are considerably lower than an apartment building or office complex, and investors can scale their investments to purchase an entire portfolio of properties. Additional flexibility arises from the fact that they, can create a tax-deferred retirement portfolio when purchased through a vehicle like a self directed IRA.
For investors looking to invest large amounts of capital in real estate, single family rentals can provide a unique opportunity to take advantage of many of the same great benefits found with multifamily properties. In fact, by purchasing numerous SFRs in different markets, investors can still generate multiple streams of income while mitigating risk and adding the economic diversity that comes from investing in multiple markets.
When it comes to managing a single family rental, the work and maintenance is typically less than multifamily or commercial real estate. Some of the common tasks such as refresh between tenants and general maintenance are still required, but the costs can be lower as tenants in SFRs are generally responsible for maintaining their own lawns, basic utilities, and other minor expenses.
Large commercial or multifamily properties can often be difficult or complicated to sell. Single family rentals are much easier to sell, especially if they are in markets which will attract broader audiences composed of investors as well as as individuals and families purchasing primary residences. Unlike other asset classes, real estate offers investors a means to generate cash flow through rents as well as growth through appreciation over time.
Real Estate Investing
While each of these types of real estate have their benefits and drawbacks, it is important that you do the necessary research to choose the best type of real estate to achieve your goals, as well as the research to find solid investment markets. When you choose the right markets to invest in, you can maximize your profits while simultaneously minimizing your over all risk.
An Easy way to Invest in Residential Rentals
Some of the typical challenges most investors will face are centered on knowing which markets will provide solid returns as well as how to best manage their properties. While these challenges used to prove difficult, HomeUnion® has pioneered a new way for investors to own single family and multifamily rentals.
A One-of-a-Kind Solution
HomeUnion® is making it easy for investors to own residential rentals by taking care of all the hard work for our customers. HomeUnion® addresses some of the biggest obstacles faced by real estate investors.
HomeUnion® starts the process by doing extensive research on every neighborhood in America. We use a powerful algorithm to examine millions of data points and numerous economic factors in real estate markets such as employment rates, median home prices, average monthly rental rates, and other conditions that make certain markets more desirable to tenants. From this data we can determine where some of the best markets are located and share these opportunities with our customers.
After HomeUnion® has done the extensive research necessary to find properties in solid markets they take care of the entire acquisition process. This means all the necessary paperwork, inspections, financing, and other steps that need to take place during the purchase of a property.
Be an Investor, Not a Landlord
Lastly, HomeUnion® continues to make the investing process easy by making sure you can Be an Investor, Not a Landlord. HomeUnion® will oversee all the rehab for the property or apartment building to get it ready for tenants. Next, we’ll find high quality tenants and oversee all the maintenance of the property to make sure all tenants are happy. You can sit back and relax, while watching the residential property increase in value and collect your cash flow.
Schedule Your Consultation
This is a great time to purchase real estate, and multifamily and single family rentals are asset classes that you don’t want to miss out on. Sign up for a free consultation today to learn how easy it is to add residential rentals to your investment portfolio.