Multifamily real estate investment can become a source of consistent passive income for investors like you. Demand for apartments has remained vibrant for the past several years across the US and the industry has been witnessing an impressive growth for the past several years. One of the biggest benefit of investing in multifamily real estate is that you are investing in a tangible asset unlike paper instruments such as stocks or crypto. Moreover you also become eligible for multiple tax benefits when you invest in real estate. Let’s talk about these benefits in detail.
1. Readily available capital
Financial institutions and lenders are more likely to approve loans for real estate than other types of assets. The Mortgage Banker’s Association’s Annual Report on multifamily lending indicates that debt capital from banks for multifamily investments has grown by several folds in the past few years.
Meanwhile, apartment investing is one of the best channels when it comes to investing your savings. If you invest with syndications, the ticket size could be as low as $25,000-50,000.
2. Lesser risk
Multifamily investments offer a lower-risk proposition as compared to other types of investments wherein you may not have underlying asset value. Even within the real estate space, multifamily investing is better than single-family investing as you would have a larger pool of tenants and access to professionals who manage the risks and ensure positive cash flow.
For example, one vacant unit in a single family home is 100% vacancy but one vacant unit in a 100-unit multifamily is 1% vacancy.
3. Scalability
Investing with a multifamily syndication can enable you to grow your portfolio faster. Why? You don’t have to manage the property and involve in operations unlike single-family, fix and flip or wholesaling where you have to dedicate a significant amount of time. Moreover your investment is managed by professionals and you have access to an expert team.
4. Tax benefits
Multi-family real estate is highly tax advantaged. Most investors use a mortgage to finance the property. They can then take a deduction for mortgage interest paid during that fiscal year, which tends to be higher in the first years of ownership as the loan begins to amortize. Multifamily properties can then be depreciated over a 27.5-year period, even if the property technically appreciates in value. Depreciation can be used to offset a significant portion of the rental income collected each year, making this a highly attractive asset class for investors of all kinds.
