Multifamily investing
FINANCIAL FREEDOM
Multifamily investing has been one of the fastest roads to financial freedom chosen by many successful investors. This kind of investing is scalable and syndication allows to start in the game with a relatively small amount of capital. If your goal is to reach a state when you do what you want, when you want with whoever you want – you should give multifamily very serious consideration.
ATTRACTIVE RISK-REWARD
While no investment is without risk, value-add multifamily investing provides attractive risk-reward potential with less volatility and better downside protection than investing in stocks and bonds. Multifamily tends to generate annual returns in mid-high teens vs mid-high single digits for stock (and lower for investment-grade bonds).
ASSET CONTROL
With real estate, you own real assets vs paper assets. You control management of an apartment complex you own, expenses, marketing, revenue streams. With stocks (especially non-dividend paying stocks) you are most likely completely relying on a company’s management team and have no say in the way the asset is managed. With bonds, unless a company is in default, you have no control whatsoever.
Multi-family is one of the most successful investment vehicles for building wealth because of these factors:
Consistent Cash Flow – Class B/C apartment complexes typically generate 5 percent to 9 percent annual cash on cash return with expected IRR of 16 percent to 20 percent over a five-year period.
Economies of scale – Properties are professionally managed.
Attractive risk-reward – On a relative basis, multi-family investing is less risky than most other asset classes.
“Good” Leverage – Stabilized multi-family assets are among lenders’ favorites.
Asset Control – Once you control the asset, you can force appreciation by renovating, reducing expenses and raising rents.
Tax Benefits – Efective tax rate on multi-family assets is low or 0% due to depreciation/cost segregation. When real estate is sold, you can delay paying capital gain taxes if you use “1031 exchange” to buy more expensive piece of real estate.
Favorable Demographics – Home ownership is on the decline while population is growing.
No investment is without risk, yet multi-family investing provides attractive risk-reward potential with less volatility and better downside protection than investing in stocks and bonds. Multi-family tends to generate annual returns in mid-high teens vs mid-high single digits for stock (and lower for investment-grade bonds)