J A R R E T T C A P I T A L
10 BENEFITS OF MULTIFAMILY PASSIVE REAL ESTATE INVESTING
If you're looking for your next investing venture, there are many reasons why
you should consider passively investing in multifamily real estate
Before you decide to invest, you should be aware of what exactly you’re investing in. So, to put it simply, multifamily real estate is housing that multiple families can live in. This could mean you’re investing in an apartment building, a duplex, a townhouse, or any other such building.
Multifamily real estate is considered to be a safer and more reliable market than others such as stocks, bonds, and single-home properties. Generating passive income doesn’t have to be difficult or worrisome when it comes to multifamily real estate.
No matter which type of multifamily property you’re thinking of, there are several reasons why multifamily real estate is an ideal place to invest. Take a look at the top 10 benefits of passively investing in multifamily real estate, below.
Multifamily real estate is considered a safer and more reliable market
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1. Predictable ROI
Multifamily homes are not usually subject to the changing conditions of the housing market. Unless you’re actively in the process of buying or selling the property, your less likely to be affected by the housing market’s changes. This means your income is likely to be stable and will likely come in at predictable times. Your return on investment is something you’ll be able to quickly calculate and accumulate.
2. Stable Assets
According to MasterMultifamily.com, “Unlike the stock and bond markets, commercial multifamily investments have few downturns with 300% fewer down years since the Great Depression”. Multifamily real estate has, arguably, been one of the best assets to invest in. There is considered to be less risk in this market than in other investment markets, which should have less volatility and unpredictability.
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3. Easy Financing
“Easy financing” isn’t a term you hear often, but when it comes to investing, multifamily property
is superior to other investment types. Interest rates are also at a “historic low” according to the Forbes Council, meaning it’s easier than ever to secure a loan with low interest rates.
4. Multiple Avenues For Funding Investments
Taking out a loan isn’t your only option for investing. Some other options include 1031 exchanges (under Section 1031 of the Internal Revenue Code), through trust funds, with cash, or with Self-Directed IRAs.
5. Enjoy Income Immediately
Well, almost immediately. You’ll receive your first distribution check within your first month of the property being stabilized. The property will likely be making money every month from the tenants’ rent, so you’ll receive your passive income.
6. No Experience
Necessary Passive income should be just that - passive. When investing in multifamily real estate you basically have two choices:
multifamily property is superior to other investment types. Unlike investments in other areas, such as with stocks, the process is simpler
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passively investing or acting as a landlord. Direct ownership of the property requires a lot of knowledge and experience that you may not have or want. Being a passive investor means you don’t need to directly speak with tenants or handle issues, therefore you don’t need any property management experience.
7. Avoid Day-to-Day Property Management
Along the same lines as the point listed above, not needing any property management experience also means you don’t have to do any managing of the property. Maintaining the grounds, handling tenants’ issues, calling in maintenance professionals such as plumbers, and making payments to shared utility companies such as garbage disposal firms, are just some of the tasks required of a landlord or property manager. If you were to actively invest in property, these duties would fall to you. Thankfully, generating passive income through multifamily real estate allows you to earn without the work.
8. Tax Benefits
Most people don't like paying high taxes. That being said, earning passive income from multifamily
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real estate may actually help you learn to appreciate taxes. From deductions, to depreciation rules, you may end up profiting from the interesting way the IRS has chosen to handle passive income from multifamily real estate. For a more in-depth look into the various tax benefits of multifamily investing, consult your personal accountant & check out Pantheon Investment’s article, “Tax Benefits of Multi-family Real Estate”. The article outlines how depreciation works for multifamily properties, how to make property “exchanges” under Section 1031 of the Internal Revenue Code, and how capital gains benefit you as a passive income earner.
Earning a passive income from multifamily real estate may actually help you learn to appreciate taxes. From deductions to depreciation rules, you may end up profiting from the interesting way the IRS has chosen to handle passive income from multifamily real estate.
9. Limited Liability
Active investing exposes you to legal and financial liabilities that may occur. Passively investing means your liability is limited. You will only be liable for the extent of the nominal values of your investment. In other words, your private income or assets will not be affected were any issues to arise, only your investment into the property.
10. The Future Is Bright
Statistically speaking, adults between the ages of 20-34 are the most likely to rent and there are over 67.5 million people in this age group in the US. About 60%-70% of this age group are currently renting and this number is projected to only go up in the next 30 years, according to MasterMultifamily. If the market didn’t already seem reliable to you from the fact that there have been 300% fewer down years since the Great Depression, then hopefully the fact that the numbers prove the future is bright will help to ease your mind.
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If you like generating passive income with little limited liability, excellent tax, benefits, and no experience needed, multifamily real estate is the ideal market for you.