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Dec 2, 2022

Multi-Family Residences

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Why invest in Multi-Family-Residences (MFR)?

As a real estate investor, it is worth considering different categories of properties and how their unique benefits and risks could affect your portfolio needs. Before diving into the many potential financial advantages of multi-family residences (MFRs), it is important to understand how MFRs differ from other property types.

What is a multi-family residence?

A multi-family residence is any residential property containing more than one housing unit. Duplexes, townhouses, and apartment buildings are examples of common MFRs. MFRs are typically used to house several families or a large number of tenants, as opposed to single-family homes. 

The benefits of investing in multi-family residences

Investing in multi-family residences can offer a range of financial benefits for investors:

  1. Diversification: Like all real estate investments, MFRs are considered alternative investments. They provide investors with exposure to opportunities outside of the public markets. Diversifying into MFRs can help investors stabilize returns in market downturns or inflationary environments. 

  2. Stability: MFRs house numerous tenants, so investors can typically realize more overall cash flow stability than they might from single-family residences. The relative effect of vacancy is lowered when a property is leased to multiple residents. 

  3. Efficiency: MFRs are typically considered efficient property types from both a time and cost perspective. For example, it is significantly easier to install appliances for various units in a building rather than being installed house by house. Another efficiency consideration to keep in mind is that MFRs are more adaptable to the needs of a growing population. Since MFRs house more than one tenant they are more efficient from an urban planning standpoint. They also tend to be located in more densely populated areas and therefore often situated near epicenters of commerce and active economic activity. 

Things to keep in mind when investing in MFRs

Investing in multi-family residences can make a great addition to an investment strategy, but they can also come with higher costs and risks than other investments including other types of properties. 

  1. Cost of entry: The cost of entry into a multi-family residence is typically higher than that for other types of investments since MFRs can often generate a higher cash flow. Square footage is also typically larger than for single-family residences. 

  2. Geographic diversity: MFRs tend to have less geographic diversity than single-family homes since you are investing in one area at a time. Lowered geographic diversity means higher exposure to local economic shocks including changes to your local real estate market.  

  3. Active management: MFRs often require more active management and regular maintenance tasks, which can take up extra time and resources. 

  4. Taxes and regulations: MFRs may come with additional regulations and taxes that need to be taken into consideration when deciding whether or not they are a good fit for your portfolio. 

It’s important to note that many of the disadvantages associated with investing in MFRs are mitigated or become obsolete when investors invest in MFRs through the Landa platform:

  1. At the time this was written, the cost of entry of MFRs on the Landa platform ranged between $11 and $27.50 per property share.

  2. Landa also takes care of the entire property management side of all listed properties so that investors can focus on doing what they do best - investing. 

Why Landa invested in multi-family residences in NY

Throughout 2022, cities across the United States have been making a tremendous comeback, with increasing populations and a return to the office in urban environments. In conjunction with the ensuing migratory movement, and after careful due diligence, Landa acquired several multi-family residences in New York. It is our strategy to invest in multi-family residences in areas with lasting economic value, like New York City.

By investing strategically in multi-family residences in areas with lasting economic value, we believe these MFRs will generate steady and long run returns for our investors.

The takeaway

Multi-family residences can be a great way to add value and exponential growth to your portfolio. Investing in multi-family properties can provide investors with stable cash flow and positive appreciation. 

If you are interested in learning more about our current MFR offerings or would like to invest in a multi-family property check out our listings on the app.

As always, to ensure your investing goals are met, it's important to do your research before investing, to ensure that the properties you are evaluating will help you reach your investing goals. 

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