Apartment building investing has important advantages over investing in single family homes.

Risk Reduction
The first and foremost advantage is financial risk reduction. For example, if you invest in a duplex, you reduce your risk by half vs. a single family home. If you invest in a four-plex, you reduce your risk even more and so on. This is because the more units you have under one roof the easier it is to absorb tenant turnover.

It’s rare to have all the apartment units empty at the same time, unless something out of the ordinary has happened. Multifamily properties with one or two vacancies, generally, is not going to affect the investment’s value and you are not likely to need to place any of your income into this property, as there will always be enough tenant-generated income.

Apartment building investing is considered a wise investment because as long as there are tenants, there should be enough income to pay the loan, property taxes, property management and a repairs reserve and still have monthly cash flow. Don’t buy the property otherwise.

When a commercial real estate property is bought properly, other people pay your loan amount. The tenants pay your mortgage and expenses, and most importantly, they pay you. Because this is true, the more units you have under one roof, the more your initial investment will pay off.

Built-in Appreciation
Another advantage of investing in commercial real estate is forced appreciation. This is a very powerful concept. There are two key ways to gain forced appreciation.

One way is to buy a fixer-upper apartment building below market value. Look for apartment buildings with some fixable structural or cosmetic problems and fix them. These properties may be ones that other real estate investors are passing up rather than fix the existing problems. If it just needs simple updates to make it more profitable, it may be an excellent purchase.

Any commercial real estate property once repaired, modernized or even just painted, will instantly be worth more. There is an initial cost with any improvements you make, but it can be regained quickly by either renting at a higher price or reselling the property.

The second way to gain forced appreciation is through rental increases, whether it’s based on property improvements or annual rent increases, the value of the property is tied to the increase in rents and expense control.

Summary
Multifamily property investing is a sound, profitable way to make money in real estate. You control risk much better than investing in single family homes and property management is much easier with multiple units under one roof.

Financing apartment buildings is easy with down payments as low as 7.5% on loan amounts above $2 million. Loans under $2 million can be financed with 10% down.