Why Invest in Multifamily?

Unmatched Stability, Proven Performance and Unrivaled Tax Breaks

Higher Returns

Real estate offers investors the ability to generate high absolute returns. An absolute return takes into account appreciation, depreciation, and cash flow to measure the amount of money an investment earns over time.

Economies of Scale

Improves efficiency. One can operate 100 units, for less time and money than 100 separate single-family homes. There is monthly cash-flow to investors from rental income, as well as other sources such as laundry revenue, pet fees, late fees, covered parking, etc.

Recession Resistant

Regardless of the economy, people still need a place to live. The more affordable Class B and C rental properties have done historically well in past recessions. These are workforce housing and are in extreme short supply.

Market Valuation

Commercial properties are not valued like residential properties which are typically appraised utilizing sales comparisons in the area. Instead, a commercial multifamily property is viewed as a business that is valued primarily by its Net Operating Income (NOI).

Appreciation

Forced appreciation by deliberately adding value to the property – executing the business plan. Organic appreciation due to market conditions.

Leverage

From a lender’s perspective, multifamily is considered lower risk compared to most other commercial real estate. Can obtain long term, NON-RECOURSE loans from Fannie Mae, Freddie Mac and HUD. Can partner with other investors to invest in bigger deals.

Tax Benefits

Depreciation is one of the biggest and most important deductions for rental real estate investors because it reduces taxable income but not cash flow. An investor can deduct the straight-line depreciation of a building over 27.5 years (plus bonus depreciation with cost segregation, certain assets can be depreciated over shorter periods). This means that a substantial amount of taxes is deferred until the sale of the property. In contrast, investments in equities, mutual funds, etc. do not provide any of these benefits.

1031 Exchange

A provision in the tax code that allows real estate investors to defer paying capital gains taxes upon the sale of an investment asset. This provision allows a real estate investor to sell a real estate asset and reinvest the proceeds into a like-kind investment (another real estate asset), thereby deferring the capital gains tax in the process.

Self-Directed Retirement Account

Investing over time in a tax-advantage account like a Self-Directed IRA can have a tremendous effect on future wealth. All income, profits and appreciation from an investment in a self-directed account return directly back to the IRA without being taxed and without adding to your personal, taxable income for that year. Plus, there is the possibility of large tax deductions.