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Benefits of Multifamily Real Estate Investing

There are a number of reasons why you should not invest in multifamily real estate. The risks and complexities of large managing multifamily real estate properties are higher than with other types of investments. And the costs associated with multifamily real estate investing, from its purchase to renovations and repairs, can oftentimes be very high. Of course, all investments have risks, and you should always do your best to understand them all, but we’re here to get into the benefits of multifamily real estate investing.

Multifamily real estate is a good investment strategy to make money and build wealth. There are several benefits to investing in multifamily properties, including the potential for high returns, the ability to generate income from rent, and the potential for appreciation. Additionally, multifamily properties can be a great hedge against inflation, as rents typically increase along with the cost of living. As a result, multifamily real estate investing has become increasingly popular in recent years, and for a good reason. Let’s go more into the benefits of multifamily investments.

Benefits of Multifamily

Passive income: Investing in real estate is also a great way to generate passive income. To get passive income, you’ll have to hire someone else to do the work of managing the property for you. As the number of units increases, the easier it is to justify the cost of a professional property manager.

Cash flow: A significant reason to invest in multifamily real estate is the cash flow. Multifamily real estate can properties generate cash flow each month times the number of units. And the more residential units that cash flow, the better.

Appreciation: If you plan to invest for the long-term real estate is an asset that generally appreciates over time. Real estate prices go up and down based on things like the economy or local events in a particular area. Still, over multiple real estate cycles, real estate value tends to continue increasing. 

Tax benefits: Real estate, and especially multifamily real estate, is typically tax-advantaged in several ways. If you use leverage and finance the real estate, you can normally take a deduction for mortgage interest paid during that fiscal year. In most cases, this can be higher in the first years of ownership as the loan matures. You can then be depreciated multifamily real estate over a 27.5-year period. Taking depreciation to lower taxes can be done even if the property appreciates. As the property depreciates, that depreciation can be used to offset a portion of the rental income collected each year.

Diversification: Multifamily real estate is an excellent way for investors to diversify their portfolios away from stocks, bonds, and mutual funds. Real estate isn’t correlated to the stock market, so the stock market could tumble while real estate values increase. In addition, the real estate industry does not experience the same daily ups and downs in value that the stock market is prone to experience. This price stability makes multifamily real estate a great way to mitigate risk in your overall investment portfolio.

Low-risk investment: Multifamily property is considered a relatively “safe” investment. There are just not enough single-family homes available to meet demand, and many people can’t afford to own a house. The low quantity of single-family homes has driven the price of existing homes to all-time highs. Likewise, this creates prolonged demand for multifamily among renters who cannot afford to buy. Besides, the U.S. population continues to grow significantly faster than the nation’s housing inventory. Evidence from the past two recessions confirms that multifamily is a relatively risk-free investment. During the Great Recession of 2008, a considerable number of Americans lost their homes and had no choice but to rent. People invariably need somewhere to live, and more people tend to move into housing that they can afford to rent.

I’ve laid out many benefits to multifamily real estate, from passive income to why it’s a low-risk investment. RE-Ignite Capital invests in multifamily real estate and works with investors who take advantage of these opportunities to achieve outstanding returns. Schedule a call with us today if you’d like to learn more about how this process works.