July 20, 2024


Mad about real estate

Multifamily Properties: The Ideal Investment

There are many investments out there that can create wealth and security. People invest in stocks, bonds, and single-family homes, but multifamily properties are the ideal investment. Other investments have some of the following attributes, but only multifamily properties have all five.

I – Income – Multifamily properties produce income. Unless you receive dividends, most stocks don’t give you income, and although single-family rentals might bring a little cash flow, the income is usually not substantial unless you’ve held the property for many years. Receiving regular income from your investment frees you up to do other things.

D- Depreciation – Although multifamily properties increase in value over time, for tax purposes they depreciate. The tax benefits of depreciation are substantial, and many investment vehicles lack this significant attribute. Stocks and bonds bring zero depreciation. You can use depreciation when flipping single-family homes, but because the transaction is temporary, the tax benefits will not be as great.

E – Equity – The property will increase in its equity value every month just from paying the mortgage. The rent your tenants pay you goes toward the mortgage every month, so your equity increases as others pay your mortgage. Real estate investments have the advantage over stock-related investments when it comes to equity.

A – Appreciation – Over time, real estate investments appreciate, meaning they are worth more now than they were in previous years. The land beneath your property becomes more valuable over time as the city around it grows. In addition, you can increase appreciation by raising rents and cutting costs. Single-family homes appreciate as well as multifamily properties, but the scale is larger with multifamily properties, and there is more room with multifamily properties to raise rents and cut costs.

L – Leverage – Multifamily properties can be bought without any of your own money. When you sell a property, the equity you’ve gained in it can be applied five-fold to purchase a bigger, more expensive property. Generally, you need 20{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} down on properties, so $100,000 in equity on one property means you can leverage that equity to acquire a $500,000 property. Every time you sell a property your leverage becomes greater.

As you can see, multifamily real estate is the IDEAL investment vehicle, offering the best odds in income, depreciation benefits, equity, appreciation, and leverage into bigger and better avenues.

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