If you’re building an investment portfolio full of profitable rental homes in San Jose, it should include multifamily buildings and units. If you’re thinking about investing for the first time, and you’re not sure where to start - we also recommend multifamily properties.
San Jose is an especially good market for multifamily investments.
Investing in multifamily properties can be a smart move for many reasons, and we’re looking at the benefits of investing in multifamily properties in San Jose. We’re also helping you identify profitable investments that will make the most sense.
Tenant Demand for San Jose Multifamily Rentals
One of the most significant benefits of investing in multifamily properties in San Jose is the high rental demand. San Jose is a booming city with a growing population and a thriving economy. More people moving to the area means that there's a constant demand for rental properties.
Investing in multifamily properties gives you a chance to meet this demand and provide people with a place to call home, which can result in a consistent, steady income stream.
With rental values rising over the last couple of years, many tenants have found themselves looking for economy when it comes to choosing a rental home. Units in a multifamily buildings are more desirable than single-family homes because the rent is often lower, and there’s less maintenance and upkeep involved for residents.
The tenants drawn to multifamily rentals are well-qualified; they have steady income and good rental histories. But, with inflation making everything more expensive and rents being higher than they were a year ago, an apartment or a duplex is far more attractive than a single-family rental home.
Consistent Rental Income from Multiple Sources
Investing in multifamily properties can offer a lot of protection against vacancy risk. Think about what happens when you rent out a single-family home. When your tenant moves out, your rental income ceases. And, you’re paying out of pocket for a lot of expensive turnover costs.
When you own a building with four or six units, one tenant moving out disrupts your income stream, but not in the same way. You still have monthly rent coming in consistently from the other units.
Having multiple units can result in a steady income stream that’s less dependent on a single tenant. Real estate investors love this sense of security and the ease with which they can budget. This is a huge benefit to multifamily investing, and it can save you a lot of money and stress.
Tax Benefits for San Jose Real Estate Investors
Investing in multifamily properties comes with some fantastic tax benefits.
When you invest in any type of rental property, you can write off various expenses, such as property management costs, property taxes, qualifying repairs, and upgrades. So, if you’re worried that some of your expenses may be higher when you buy multiple units, remember that these deductions can help minimize your taxable income, hence lessening your tax bill. Additionally, investors can also benefit from depreciation deductions that offset your taxable income.
There’s also unit economics that help you defray the cost of maintaining and managing multifamily properties. You’ll pay less per-unit on things like landscaping, pest control, preventative maintenance, and professional San Jose property management.
Increased Portfolio Value and Size
When you’re growing your San Jose real estate investment portfolio, investing in a multifamily property will move you closer to your goals than a single-family home. You’re able to bring in a handful of properties rather than just one. This gives your entire portfolio some diversity as well as extra strength.
Industry data tells us that the typical hold time for multifamily investments is around five years. Maybe you have a 10 or 15-year investment plan and you’ll hold onto the assets a bit longer. That will earn you even higher returns. If you’re an investor who doesn’t like to keep your money tied up in one property for too long, you’ll do just fine. But, if you are thinking about the overall long-term value of your portfolio, you’ll find yourself earning recurring rental income and larger returns well beyond the 5-year mark.
Evaluate your investment goals before you buy, and make sure your experienced San Jose property management company can bring you the essential data you’ll need to make a smart decision, including estimated rental values, time on market, and maintenance costs. Some other things to consider before you buy:
Occupancy and Tenant Retention Data
Occupied multifamily properties are often smart choices for investors who don’t want to spend a lot of time marketing, screening, and filling vacancies. Check the lease agreements and the tenant retention numbers so you know how long tenants tend to stay in the building. Evaluate eviction rates and vacancy lengths. Profitable multifamily investments in San Jose will have stable tenant retention statistics, low eviction rates, and very few claims, disputes, and lawsuits. You’re looking for consistency.
The location of your multifamily property impacts the tenants you attract, the rental value of each unit, and the overall profitability of the investment. Target properties that are in desirable school districts and close to freeways, shopping, and entertainment. In San Jose, there are dozens of submarkets within the larger rental market.
Investing in multifamily properties in San Jose can be a smart move due to the high rental demand, potential appreciation, tax benefits, and multiple income streams. However, it's essential to do your due diligence to ensure that you make the right investment decision.
San Jose is an outstanding market for investors, no matter what type of property you’re looking to acquire. If you’d like some help navigating the inventory, evaluating the competition, and putting together a smart investment strategy that will deliver the income and returns you want, we can help you. Our team has worked with new and experienced investors for years, and we’re excited to work with you on your investment goals.
Please contact us at Cornerstone Property Management.