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Cashflow
The number one reason we love multifamily real estate is cashflow. This is the stream of income every year – or every month with Lease Capital – deposited into your bank account. The more cashflow, the better.
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Forced Appreciation
You can force the appreciation of a property by increasing the income or decreasing the expenses resulting in a drastic increase in value over night. You cannot force the value on single family homes, storage units, or raw land like you can on multifamily.
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Rent History in America
In the past 70 years, rents have always increased year over year. We believe they will continue to do so, and even more aggressively with today’s economy and inflation.
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Increased demand for affordable housing
In 2024, buying a house is not affordable for many people. The average home price in America is just about to hit $400,000 and a mortgage of $3,600+ per month. The average rent is $1,500-$1,800 per month in the US. The largest disparity between renting and owning a home in American history is right now. America needs more affordable housing.
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Performs during recessions
During recessions, people still need a place to live. While other goods and services are put on hold, paying rent is a priority. In 2008 when the housing market crashed overnight, the multifamily apartment market did not. You want your money as safe as it can possibly be during a bad economy or a recession.
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A place to protect your capital
You want to put your money somewhere where it is safe and protected. Multifamily apartment buildings not only increase your dollar but protect it from bank failures, stock market crashes, and theft. I trust my dollar is safer in multifamily investments more than a bank or under my mattress
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More doors, one Address
With apartment buildings, you have more units and fewer addresses. Fewer addresses means less overhead and less maintenance. If youown 200 houses, how hard do you think that is to manage vs one address with 200 units? You have maybe 2-3 roofs, not 200. 200 of the same HVAC units, not 200 different ones. One location, not 200. 1 purchase and closing, not 200. The difference in resources to purchase, operate, maintain, and manage is incomparable. I once heard from asuccessful real estate entrepreneur that managing one 20 unit apartment building requires the same management intensity as one short term vacation rental property.
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Inflation
Not only is multifamily a hedge against inflation, but your equity also increases drastically when there is inflation. When there is inflation,
the multifamily property goes up in value. We dislike too high of inflation in our country and economy, but we LOVE inflation for our property values. And where there is inflation, there are also rent increases to follow. Without doing anything, inflation increases the IRR
(internal rate of return) on your investment -
The Disparity Renting vs Owning
I need to do an entire blog on this subject. In 2024, the disparity between renting and owning in America has never been higher, which makes owning apartment buildings a phenomenal investment in itself, let alone the other 9 reasons written here. The average rent in America is $1,536 a month. The median sale price of a home in America, is $412,000 in America *. The cost for a new mortgage in America with today’s interest rate is around $3,000 (with 6% down – the average down payment ). That doesn’t include the maintenance cost of $1,180 per month on an average house in America. This doesn’t include taxes – the average of which is $2,400 per year. Taxes, maintenance and mortgage = $4,380 to live in a house on average vs rent for $1,500 on average. That is roughly 3x the cost. This is driving more renters, due to massive demand, and a greater disparity with the cost of owning a home. At a cost of $4,380 to own and operate (not including remodels and improvements), a home is simply not affordable for millions of Americans.
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Tax deductions
Last but not least, commercial multifamily real estate not only provides income and appreciation but also some of the best tax deductions that exist. Your property depreciates over time (the purchase price paid) which gets deducted off the annual income the property produces. Improvements to the property get deducted this way over time as well. You also get to deduct all expenses to operate the property, including managing. If you have debt, 100% of the interest is deductible as well. It is not out of the ordinary for properties to show a loss on a tax return even when making real income on it. If you own a business such as having your own practice as a doctor, lawyer, or accountant, you are great at producing income and need to highly consider adding this investment to your arsenal to reduce the taxable income you know how to make. I am not an accountant, so I recommend getting a great CPA on your team who knows the tax code and your personal income situation, one who is on your side to reduce your tax liability. The alternative is giving the government a large percentage of your income to spend how they choose, without your input that you could instead be using to invest and create more passive income. You can then spend more, give more, stimulate the economy, and help your community. It is your financial obligation to be a great steward of the money God has trusted you to manage while you are here for the greater good of his Kingdom!
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