6 Benefits of Multifamily Investing
With inflation at a 40 year high and volatility in the equity markets, multifamily assets provide investors with a stable opportunity to leverage their capital to beat, and profit, from inflation, while also giving several other benefits. Multifamily properties are a strong investment vehicle and would make a great addition to any investor’s portfolio.
Cash Flow
An immediate benefit of owning a multifamily property is the reliable monthly stream of income having someone else pay your mortgage! Rents are predictable, and in strong markets like South Florida, units can be turned over easily and re-leased to ensure steady cash flow year in and year out. You can even generate income beyond rents. The availability of ancillary income sources can considerably and directly impact the value of the property equating to greater growth in profit!
Hedge Against Inflation
Unlike bonds and cash, which decrease in purchasing power during periods of inflation, multifamily properties are a fantastic hedge against inflation because they hold intrinsic value, are in limited supply, and are a yielding asset. As inflation increases, like it is now, lease structures allow for rent reprice and increase while your fixed mortgage payment remains the same. This gives you greater cash flow!
Tax Benefits
Real estate is a great investment strategy for protecting and growing your wealth. Multifamily buildings are arguably among the most tax-advantaged options within the real estate sphere. Uncle Sam can become your best friend as you take advantage of the many tax benefits including, but not limited to: 1031 exchange, depreciation, repairs + improvement deductions, write-off of losses.
***Always consult a tax advisor regarding your portfolio.
Scalability
Multifamily real estate investing is appealing given the ability to scale one’s portfolio among this asset class. Instead of purchasing single-family rentals one at a time, multifamily allows you to acquire multiple properties within one building. It’s a much faster way for an investor to grow their portfolio and passive income.
Demographic Shift
With baby boomers entering their retirement years, we are seeing a large population that will require a variety of different housing options. While the majority of this group will be homeowners, there is an increasing preference toward renting! Whether due to downsizing, freeing up cash, or no longer wanting to deal with home upkeep, the trend is that baby boomers increasingly prefer renting over buying. Millennials, for different reasons, are also trending toward renting over buying. According to the Housing Policy Finance Center, millennials are less likely to own a home than previous generations. A major reason for that is relative affordability. As rising home prices substantially out pace income, home ownership becomes out of reach for many, leaving renting as the only option. Multifamily assets are well positioned to benefit from this shift.
Basic Human Need
What it comes down to is simple: Everyone needs a place to live! Housing is a foundational and basic human need– a type of demand that will never go away, even in a pandemic or recession.