There are many ways to get started in real estate investing. For the beginner, a good strategy might be to purchase a multi-family rental unit. Four families or less per building is the ideal size to look for. This will allow you to purchase a building with a residential mortgage, taking advantage of lower interest rates. Here are some good reasons why investing in a multi-family building may be less risky than other types of housing.

First is the competition. There will be more investors looking for those single-family homes. This can increase the price of those homes to a point where they won’t generate cash flow for you. Don’t depend on appreciation to create cash flow. You need your properties to be cash flow positive from the start. If you are considering homeownership, you may also be able to purchase a unit that has more than one tenant option.

Then there is the fact that you have more than one unit to rent. If you buy a single-family home and the tenant moves out of town, you must cover the full mortgage payment until you rent it again. With a multiple family, it would be highly unlikely that all of your units would be unoccupied at once, giving you a bit of protection. If you have a four-unit building, the fact that one tenant has moved out may not even give you negative cash flow. This could make all the difference in the world to your annual earnings.

Multi-family units bring you more money per month. Depending on your market, duplexes or triplexes can be priced the same as a single-family home. However, you can get more rent from 2 units than from a single unit. So you’ll get more money each month for about the same mortgage payment. Which means more positive cash flow – the most important aspect of real estate investing!

Repair costs per unit average less. If you have 3 single-family homes and need to replace the roof on each one, that’s a lot of money per unit. However, if you have a triplex that needs a new roof, you are actually replacing 3 roofs in one, bringing the cost per unit down. The same goes for maintenance, it’s less travel time to get from one unit to another, maximizing labor costs.

As your real estate portfolio grows, the increased cash flow from your multi-family units will allow you to pay for a property management company if you wish. This will free up your time to find other deals or do whatever you want!

So, don’t get stuck in the mindset that real estate investing only involves single-family homes. Smart investors will have a portfolio that includes a mix of single-family and multi-family properties. Just work the numbers and multifamily investing may pay off for you!