Should You Buy a Hotel or Multifamily for Long-Term Cash Flow?
- Nate Jones, CPCU, ARM, CLCS, AU
- Oct 13
- 2 min read
When it comes to building long-term wealth through commercial real estate, two asset classes often dominate the conversation: hotels and multifamily properties. Both offer unique advantages, but which one delivers better long-term cash flow and stability?
Let’s explore the key differences and investment potential of each.
Multifamily Properties: Stability and Predictability
Multifamily properties—such as apartment buildings, duplexes, and townhomes—are known for their consistent rental income. With multiple tenants and staggered lease terms, these properties offer diversified income streams, reducing the risk of total vacancy.
Key Benefits:
Stable Cash Flow: Monthly rent payments provide predictable income.
High Occupancy Rates: National averages exceed 94% in professionally managed communities.
Recession Resilience: Demand for rental housing remains strong even during economic downturns.
Tax Advantages: Investors benefit from depreciation and other write-offs.
Multifamily investing is ideal for those seeking long-term financial security with minimal volatility.
Hotels: High Returns with Higher Risk
Hotels generate income through nightly bookings, events, and partnerships with major brands like Marriott or Hilton. Unlike multifamily leases, hotel rates can be adjusted daily, allowing for dynamic pricing based on demand.
Key Benefits:
Higher Income Potential: Hotels can outperform multifamily in peak seasons or high-demand areas.
Brand Leverage: Branded hotels often enjoy better occupancy and pricing power.
Flexible Revenue Streams: Income from conferences, dining, and amenities adds to profitability.
However, hotel investments are more sensitive to economic cycles, travel trends, and location. Luxury hotels may struggle during recessions, while extended-stay or airport hotels tend to be more resilient.
Which Is Better for Long-Term Cash Flow?
Multifamily Properties:
Cash-on-Cash Returns: Typically, 3–6% annually.
Lower Operational Risk
Consistent Demand
Hotels:
Higher Upside Potential
Dynamic Income
Greater Operational Complexity
If your goal is steady, recession-resistant income, multifamily is the safer bet. If you’re comfortable with market fluctuations and want to capitalize on seasonal demand, hotels may offer higher returns.
Final Thoughts:
Both asset classes can be profitable, but your choice should align with your risk tolerance, investment goals, and management capacity.
At Wexford Insurance, we specialize in commercial property insurance for both multifamily and hotel investments. Whether you're a seasoned investor or just starting out, our tailored coverage helps protect your assets and maximize returns. Connect today!
FAQs
1. Are hotels riskier than multifamily properties?
Yes, hotels are more sensitive to economic cycles and seasonal demand, while multifamily properties offer more stable income.
2. Which property type offers better tax benefits?
Both offer depreciation and other tax advantages, but multifamily tends to have more predictable deductions.
3. Can I convert a hotel into a multifamily property?
Yes, hotel-to-multifamily conversions are gaining popularity, especially for underperforming hotel assets.
