If you’re a real estate investor and are looking to expand your investment portfolio, we have some good news for you! You might be investing in the hot housing market as of late, made a good profit, and have gained lots of experience along the way. But now what you actually need to look into is the next big opportunity in real estate development. Build-to-Rent! As commercial Hard Money Lenders in Houston, we’re here to give you all the tips we can to make you a profitable real estate investor. Read till the end to find out more.
Any residential property that has more than one housing unit is called a Multi-Family Property. Mortgage investors commonly invest in single housing units. But if you would like to follow the latest trend, and capitalize on a great opportunity, be sure to give this investment a try. Make sure you obtain quick and flexible financing from the best hard money lender in Houston, AMI Lenders.
Why Should You Invest in Multi-Family Properties?
Here are a few benefits of investing in multi-family properties:
- The most obvious benefit of multi-family property investment is that it generates income from multiple sources, leading to bigger cash flows for you.
- Multi-Family properties will provide you with easy income. But you’ll have to hire a property manager who can look after the day-to-day business and maintenance.
- Multi-family properties are valued higher than single-family properties because numerous streams of income can be earned through them.
- These properties are less risky for investors because they’ll be dependent on a large pool of tenants vs a single one. Even if one unit is vacant, you’ll still be earning from other units.
- There are a lot of tax benefits associated with multi-family real estate. For example, multi-family properties have complex physical structures consisting of mechanical systems for electrical, plumbing, etc. The condition of these systems deteriorates over time and can account for major depreciation expenses. As depreciation is a non-cash expense, your tax liability decreases as a result of decreased net operating income. Read more about this here.
Construction Projects
Typical construction projects that you can work on include “in-fill” properties or build-to-rent multi-family properties. An in-fill property is constructed on vacant or underused plots between already existing buildings. You can leverage hard money loans for in-fill construction projects such as duplexes, townhomes, apartment complexes, or condominiums built on these vacant plots. You may also choose to live in one of these units yourself.
A Few Considerations for Build-to-Rent
Here are a few calculations that you will need to do and a few things that you need to look out for before investing in building a multi-family property to rent:
Calculations
To check if investing in a particular piece of real estate is going to be worthwhile, you need to determine how much money you can make from it. The simplest way to do this is by calculating the difference between your expected income (from rent and other fees) and expenses (maintenance, repairs, etc.)
However, sometimes it’s difficult to figure out your expenses beforehand. In this case, just divide your estimated income by 2 and this number becomes your estimated expense. Now you can calculate the difference between your estimated income and estimated expenses to find out how much money you’re going to make from the investment.
Moreover, you also need to calculate your cash flow (by looking at the monthly mortgage rate) and your capitalization rate to see how quickly you can earn a return on your investment.
What to Look Out For
For building multi-family properties to rent out, you must consider their location and the total number of units to be built. Often the first thing that tenants look at is the location. It is even more important for multi-family properties because there are a greater number of tenants involved. The number of units is also an important consideration because your income will depend on it. If you’re only getting started in the world of real estate investment, we suggest that you start with smaller properties with 2 to 4 units. Once you’ve built a few smaller properties and understand how these types of investments work, you can take on larger projects.
The Bottom Line
If you've decided that you do need a loan for buying a multi-family property, you need to look for private money lenders. Choose AMI Lenders if time is critical for you, as we are one of Houston’s fastest closers. We fund our own loans and are able to move as fast as the law allows. Borrowers in Houston will also have a hard time finding lower rates for hard money or private loans than those that we offer. We want our customers to succeed and take advantage of the financial opportunities offered by real estate investment. Visit our website today and fill out an application for a private loan.
Visit our website today and fill out an application for a private hard money loan in Houston.
For over 30 years, AMI Lenders have been providing financing options to individuals in the Houston area. If we aren't able to assist you, we'll be happy to direct you to someone who can.
Contact us for any questions or apply online!
