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Why Multifamily?
One of the primary benefits of investing in multifamily assets is tangibility. Unlike many other financial instruments, real estate is a physical asset that can be seen, touched, and experienced. When we purchase a real estate asset, we aren't reliant on appreciation in value to generate a return, but rather find opportunities to add physical value to the asset and force appreciation through improvement.
Investing in multifamily real estate has consistently provides exceptional returns on investment. Unlike traditional investments such as the stock market, which has averaged a 6.39% inflation-adjusted return over the past 30 years, multifamily investments have persistently achieved inflation-adjusted returns of 12% or more per year. Additionally, multifamily real estate is a truly passive way to invest, allowing investors to generate income without any active involvement in management and direct access to routine reports on the activity of their investment.
Real estate has a distinct tax advantage over practically every other investment. The IRS incentivizes real estate investors by allowing a 3.6% depreciation of the value of a building each year. This depreciation is intangible, meaning it doesn't actually affect the value of the building, but it does reduce taxable income. All real estate benefits from depreciation, but multifamily real estate benefits from a unique attribute called "bonus depreciation" that allows us to depreciate up to 100% of the ENTIRE value of the investment in the first year of ownership. We can realize this bonus depreciation by performing what is called a "cost-segregation study." In addition to this depreciation benefit, we can also perform a 1031 exchange when selling the asset to defer capital gains taxes and simply re-invest our gains into a new asset instead.
By investing in, and operating, multifamily assets ourselves - we are able to have a hands-on and direct approach to managing investment decisions. We can improve the value of assets through renovations or changes in operating strategies. Micro-decisions we make can create and maintain strong improvements and stability at our communities.
