Townhouse and Apartment Investment Properties
Multi-Family Unit Properties
What Is a Multi-family Unit or Property Investment
Image: Apartments and Townhouses. Designed and built by Metricon (one of our builders).
Multi-family properties or apartment complexes are buildings with more than one rentable unit. While there are fewer restrictions to building a portfolio of small homes, multi-family real estate investments have several advantages.
Benefits Of Townhouse and Apartment Investment Properties
- Stable Income Stream
Townhouse or apartment rental property investments provide a regular and dependable income stream, producing a positive cash flow that is higher than typical stock dividend yields. Property investment also has an overall much greater return on investment (ROI) over time. Always take into account the lifetime of your investment; in this department, townhouses and apartments are often considered to be the safer investments.
- Debt vs Income
The amount of the property’s net operating income (NOI) can often be used to reduce the debt on the property. The NOI is calculated by the gross income less all expenses before debt. Since the NOI can be higher on low maintenance apartments and townhouses, it can be used to cover loan repayments, thus reducing the debt balance and creating equity.
- High Appreciation Value
Multi-family rental properties provide excellent appreciation in value that often meets or even exceeds other investment types. Remember, you should maintain your property so it retains its value over the long haul. The grounds must be well kept and minor repairs performed as part of an ongoing maintenance plan. This is easier to do when you have quality maintenance staff in place, who share your desire to provide clean, safe housing. Townhouses and apartment complexes often have a body corporate arrangement in place that will take care of common area maintenance on your behalf.
- Reduced Maintenance Costs
Ideally, you want tenants who will take an interest in caring for the property. This can lower the number of repairs that are required with every lease renewal. Since the majority of people who rent out apartments and townhouses are singles, couples or small families, the average costs of property management can be lower on an annual basis.
Here’s Why a Townhouse or Apartment Is a Good Investment for Any Conservative Property Investor
Demand
Townhouses and apartments will generally cater to a wide range of different demographics. They’re appealing to young professionals, small families and retirees looking to downsize. Because of this broad range of potential renters, the demand for townhouses and apartments is always relatively stable, particularly in metro areas with a higher population and a consistent need for housing.
Additionally, as population demographics and lifestyle preferences continue to evolve, we’re seeing a growing movement in support of simplified urban living. This should continue to foster demand for townhouses and apartments in the future.
Cheaper Property Prices
A detached or single-family home will offer a wide range of benefits for investors, but they also require a much bigger up-front investment. In contrast, townhouses and apartments can be a more affordable option for entry-level buyers. A lower purchase price means investing in an apartment or townhouse can be achieved with a lower deposit and lower borrowing capacity, making them the ideal choice for first-time investors.
Ability to Diversify Your Portfolio
The lower price point of apartments and townhouses also makes them ideal for conservative investors who want to diversify. To safeguard against market fluctuations, some investors prefer to purchase a range of different properties in multiple areas (ensuring all their investment eggs aren’t kept in one basket).
Value, Liquidity and Buyers
While townhouses and apartments may have lower initial purchase prices, they can still appreciate in value over time. This is especially the case if they’re in sought-after locations close to urban areas.
The diverse pool of potential buyers for townhouses and apartments also helps to ensure that investors have multiple exit strategies available, if necessary. From first home buyers to other investors or downsizing retirees, the steady demand for apartments and townhouses ensures investors won’t be stuck with an asset that is difficult to liquidate.
Key Takeaways
Investing in townhouses or apartments can be beneficial for conservative property investors due to their high demand, lower initial costs, diverse pool of buyers and potential to appreciate in value. These factors make them an appealing and relatively safe real estate investment option.
This information is simply a guide to help you with your research. The type of property you ultimately invest in will still depend on the type of property investor you are.
Here at Positive Income Properties, we source the right property deal based on what will work for our client. We are involved every step of the way, from sourcing to financing, and from settlement to leasing the property. Whether you are a seasoned property investor, a beginner or simply want to buy your first home, we will assist you. We can secure tenancy from the onset of settlement, ensuring a streamlined process.
To find out more about how we can assist you, please refer to our 1-3 Year Rental Guarantee. If you are still undecided or are locked in on a particular property or budget – subscribe to our FREE Resources and Property Deals when you click the button below.
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