For those of you new to investing in commercial real estate, or just looking to expand your portfolio, a multi-family commercial property is a solid investment with a great potential in amassing capital.
INCO Commercial is one of the leading companies in commercial real estate serving the Long Beach, Irvine, and Riverside areas. We are committed to the best interests of our clients and will work closely together every step of the way. If you’re considering investing in a multi-family commercial property, here are some benefits to consider on this kind of investment. First, we’ll explain what qualifies as a commercial multi-family property.
What is a Commercial Multi-Family Property?
To qualify as a commercial real estate property, a multi-family residential must have 5+ dwellings (units). Multi-family buildings are different by location (urban or suburban) and size of construction. Garden apartments are multi-family apartment buildings with three floors or fewer; mid/high-rise are multi-family buildings with four floors or higher.
Benefits of a Multi-Family Property Investment
Greater Cash Flow
Cash flow on a multi-family residential unit is greater than a single-family for obvious reasons: there are more tenants paying rent. Bigger apartment buildings are less influenced by any single vacancy; the more units and thus, tenants you have, the less risk you carry. With a single-family residential, one vacancy means you’re losing out on 100% of rental income. In a multi-family property, the loss from one vacancy is only a percentage of the total income, and other tenants are still contributing to covering the operating costs.
More Expensive, but Easier to Finance
The total cost of purchasing commercial real estate, including multi-family properties is higher, but lenders sometimes favor financing these types of property. This is because multi-family properties generate a much stronger cash flow month to month, therefore banks are sometimes more likely to approve the loan than with a single-family residential as they might perceive the risk on those loans defaulting to be less.
Easier Management, Whether it’s You or a Hired Management Team
With all of the properties in one location, managing a multi-family commercial property can many times be easier than managing several single family units spread out. Not only does this include managing tenants, but overseeing maintenance, employees, etc.
Because of the increased cash flow, you may be able to hire a team to manage your property, which in a large-scale apartment complex might be worth it to you. The management team can supervise the property, manage the maintenance crew, take phone calls, and even handle audits, rent, and much more.
INCO Commercial’s affiliate, CORE Property Management specializes in managing commercial and industrial properties, whether you need a full team, or just some assistance in a few areas. With CORE Property Management, you can rest assured that everything will be handled within the local, state, and federal regulations and other best practices. For a complete list of services provided, find out more about CORE Property Management.
A dedicated management team can allow for less stress on your end, and more time to manage other investments or projects you may have on the table.
The appreciation of a multi-family commercial property can depend on several factors, but many of those factors can be within your control. Although the base cost is usually higher on this kind of property, you will usually see a greater benefit in appreciation than with a single-family residential. By maintaining the property in top condition and making some improvements over time, you can add value to the property to increase the return on your investment. This means more equity for you if you choose to sell it down the line. Our expert agents at INCO Commercial can work with you to evaluate how to maximize the value of your property, and even help determine when it would be appropriate to make improvements and adjust rents.
In Southern California, the demand to rent is not going away any time soon. In fact, rents, home sales, and home prices are expected to rise throughout 2016 in Los Angeles County alone. People will always need a place to live, and with rising home prices, many people will continue to rent since they cannot afford to buy. With our local expertise, INCO Commercial agents can help project which properties would have the best potential and match your business interests.
Investing in commercial real estate has historically proven to be a sound strategy for increasing personal wealth. It is also a way to take an active role and have more control over your investments as opposed to the stock market or other types of investments. Working with INCO Commercial also offers peace of mind, knowing that our 40+ years of industry experience and intimate local knowledge of the commercial real estate market will be working on your side.
Learn more about our agents, or go to our contact page and contact the office which would best serve you. Discover our other services and affiliates associated with INCO Commercial, or explore the other types of properties our company specializes in. We look forward to working with you!