There are a lot of things to consider when investing in real estate.
One of the biggest roadblocks for many is the amount of money needed upfront to invest in such a venture.
You can take out a loan, but that has the potential to greatly increase the risk of your investment. You can purchase a smaller property, but that means less potential for sizeable financial gains.
So what’s the right answer?
I’ll tell you.
If you use this real estate hack, you can increase your annual revenue by 400% while also lowering your initial investment costs.
In the world of real estate, a multifamily property can mean anything from a two-unit townhouse to a 200-unit apartment complex.
Now, if the idea of investing in real estate is to minimize the overhead costs for you, a large apartment complex is probably not the way to go.
However, this doesn’t mean we should throw out the option of multifamily living entirely. In fact, rental properties have some of the biggest potential for financial gain in real estate.
When real estate is labeled as one of the most common ways to make a million-dollar fortune, it stands to reason that we should consider the area of real estate that has the most potential to turn the highest profit.
So, if you want to rent out a property but you don’t want to deal with the complexities and costs of a large complex, what should you do?
Invest in a 4-unit property.
There are a few reasons.
The first, and perhaps most important, is that any property with up to 4 units still qualifies for a residential loan.
Now, loans can be risky, but if you play your cards right, this one is not.
The first benefit of this loan qualification is that it minimizes the amount of your own hard-earned money going into the property. Instead, it’s the loan that is being invested.
And as long as you fill up those four units, you will never see a penny of your base savings taken by the property!
Instead, you’ll be using a percentage of your tenants’ rent payments to cover the loan, and the rest goes straight into your pocket.
This is called house hacking, and is an extremely profitable way to get in on real estate with little to no money of your own on the line.
The second reason to invest in a 4-unit property over a single-family rental is the guarantee of cash flow.
If you have a single-family rental, even if the property itself cost less, it is a greater financial risk.
This is because with a single unit, an unoccupied unit means a 100% revenue loss. But with a 4-unit property, an unoccupied unit only means a 25% revenue loss.
This means you are still earning 75% of the maximum possible revenue for your property.
While a residential property loan could spell big trouble for an unoccupied single unit property, for a 4-unit property, you will still have plenty to make your required payment and still make a profit.
The third reason for investing in a small multifamily property is the simple fact that 4 units will earn you more than 1.
Housing prices have gone up 10% in the last year, which means that real estate has an even higher potential for return on investment, especially as that percentage continues to rise after you secure a property.
With a single unit, you only have one tenant paying you rent. Let’s say you have a single-family rental. Going by national averages, you will be able to charge about $1,000 in rent each month.
Therefore, your maximum income from the property is $12,000 annually.
On the other hand, if you have 4 units, you can charge $1,000 per unit in rent each month.
That means your return from the property each year is $48,000!
Though the overhead cost of the property will be larger for more square footage, your increased rate of return will more than make up for the difference.
With a 4-unit property, your return increases by 400% each year!
If your looking to make a real estate fortune with very little personal investment, this housing hack is a sure-fire way to do it.