Benefits of Multifamily
Multifamily Syndication are Lower Risk
One of the principal benefits of investing in apartment buildings lies in its extremely low risk profile. Time after time, the multifamily market has demonstrated less volatility than single family residence and stock market. Case in point, occurred in with the 2008 housing bubble, Freddie Mac’s delinquency rates soared to 4% in 2010. In contrast the delinquency rate on multifamily loans peaked at .04%. So, if you’re looking for a recession-resistant way to invest your money, there is no better option than multi family residence investing.
Multifamily Investing Yield Above Average Returns
Real estate investing has reliably outperformed other investments categories. Since the turn of the century housing has generated higher returns than the stock market outperforming the S&P 2-to-1. Online investing platform Fundrise released statistics from 2000-2016 showing that a $10K investment in stocks yielded a 5.4% annual return while real estate was 10.7%. In addition, the cash flow generated by multifamily residence is the kind of passive income that accelerates financial freedom.. Multifamily residence investing can realistically yield minimum average returns of 12%
Lastly multi family residence are appreciating in value during the ownership period and are generally sold for a significant profit
Cashflow (Predictable Income)
Multifamily Residences (MFR’s) and a sought-after investment because they can be cash flow machines. Every month, after rent collected and expenses are paid, the variance is called cash flow. That cash flow is spendable money goes straight into the investor’s bank account. If the asset operates steadily the cash flow will be consistent and predictable.
Principal (Secure Protection)
Multifamily Investments are secured by real, tangible hard assets. In most cases, they can never be worthless and are protected by cash flow and insurance. The original equity used to purchase the multifamily investment is secure and continues to grow throughout the holding period. At disposition the equity is recaptured with the addition of loan principal pay down by the tenants.
Apprecation
Appreciation is the increase of property value over a period of time. Properties can appreciate is multiple ways. First is inflation in which the dollar depreciated, therefore the value of the property increases. Secondly is rental demand and supply. An increase in specific location rental demand can cause property’s value to increase. The key factor of multifamily residence appreciation is forced appreciation. Forced appreciation is a strategy investors uses to increases the performance and net operating income of the property by increasing rents, adding amenities and services, renting extra space, cutting down expenses and renovating the property.
Depreciation (Tax Benefits)
Multifamily residences are tax-advantaged investments. Along with providing the opportunity to earn rental income, multifamily investments offer a number of tax benefits. Taking advantage of these benefits allows investors to increase short term cash flow while maximizing tax savings over time. A major benefit is the ability to deduct depreciation of the property from your taxable income. Multifamily residences can be depreciated over the course of 27.5 years. Investors can use cost segregation to accelerate depreciation over a shorter period of time increasing deductions that offset income in the early years of ownership. Another tax benefit of investing in multifamily residences is the interest deduction which allows investors to write off interest from taxable income. Finally, investors can deduct expenses related to owning the property.
Principle Payment (Equity Growth)
Multifamily investments provide great equity growth opportunities. Investors can see equity gains from increasing income and property improvements. Equity increases can be seen over the lifetime of the property through principal pay down. Every month when your tenants pay their rent, that income goes to pay off a portion of debt used to purchase the property, creating additional equity.
Leverage
Leverage refers to the total amount of debt financing on a property relative to its current market value. Investors rely on leverage as a means to increase potential returns on an investment. The least amount of amount of cash invested into a project the higher your leverage and your ROI return on investment rental income and appreciation. In simple terms, leverage allows investors to get substantially more bang for the buck.
Accelerated Equity Return Option
When market conditions are favorable, multifamily investments have the ability to “cascade up”, increasing cash yield and equity growth. If property is refinanced, the investors can recapture a portion or all their initial equity investment while still holding the asset, earning returns and increasing equity