There are many reasons why real estate is often considered to be the best type of investment. And within the realm of “real estate investing” there are dozens of options for an individual to choose from. Residential property, commercial property, storage facilities, and vacant land all have unique benefits and the potential to offer an investor a great return.
Despite the many options available to investors, we decided to focus today’s article on an area of real estate that we buy and manage in Pittsburgh: multifamily housing. Multifamily can be considered any residential property that is not a single family home. Residential multifamily property typically ranges from 2-4 units. Buildings that have 5 apartment units or more are typically considered to be commercial multifamily properties. Regardless of the size of the building, investing in multifamily real estate has a number of benefits that potential investors should consider. Keep reading to learn more about the benefits of investing in Pittsburgh multifamily properties.
5 Benefits of Investing in Pittsburgh Multifamily Real Estate
- Multiple income streams. Multifamily real estate gives investors an opportunity to diversify their incomes. If you are working a traditional job, real estate investing can provide another paycheck, which can help in the event you lose your job or become disabled and can’t work. On top of that, multifamily investing gives you multiple paychecks so that your income is even more diversified. Consider the case of a 3-unit property. If you are working a traditional job, you will have a paycheck from your employer, and a paycheck from each of the 3 tenants in the property. If one of these paychecks goes away, you still receive monthly income from the other sources. This greatly reduces your investment risk because you aren’t dependent on income from one source.
- Strong rental demand. It’s worth noting that rental demand for multifamily properties in Pittsburgh is growing year after year. In fact, Pittsburgh is considered to be one of the best cities for millennials in America. According to the research, Pittsburgh comes in at #12 in the list of the best U.S. cities for young professionals. Pittsburgh is a city with a strong, diversified economy and a low unemployment rate. These factors tend to indicate there will be a strong demand for housing in the future, which bodes well for Pittsburgh multifamily real estate investors.
- Ability to increase property value. Let’s say you are looking to buy a Pittsburgh multifamily property with 2, 3, or 4 units. In this case, an appraiser will look at similar properties and assign your home a value based on what other similar properties have sold for. However, the process is very different for 5+ unit commercial multifamily properties. These properties are appraised based on the amount of income they produce. Therefore, if you are able to raise rents or increase income through other means (e.g., adding laundry, charging for parking), you are able to increase the value of your building without having to wait for other properties to sell.
- Economies of scale. As you purchase more properties, multifamily buildings tend to be easier to manage compared to single family properties. For example, it’s easier to look at the profit/loss of 50 duplexes than it is to look at it for 100 single family homes. The same can be said about improvements and repairs. In keeping with the previous example, it would be better to have 50 roofs to be responsible for than 100. And, if you have to replace a roof, you are essentially sharing that cost among two units as opposed to one in the case of a single family rental.
- Better cash flow. Pittsburgh multifamily properties typically generate higher rental income compared to single family properties. If, for example, you have a 1600 sq. ft. 3BR/2BA house in Pittsburgh, you may be able to rent it out for $1600 per month depending on the neighborhood where the property is located. However, a duplex of equal size with a 2BR/1BA unit and a 1BR/1BA unit could generate $1,200 and $700 per month respectively in that same neighborhood. That’s an extra $300 per month for a building of the same size!
We Understand the Benefits of Investing in Pittsburgh Multifamily Properties
McIntosh Management, LP is an owner and operator of multifamily properties in Pittsburgh. We are currently looking to expand our portfolio of properties and would like to speak with you if you own a property and are interested in selling it. If you or someone you know is interested in selling a multifamily property, give us a call or fill out our form. We would welcome the opportunity to speak with you about your rental property!