“If you don’t find a way to make money while you sleep, you will work until you die.”
What makes multifamily investing ideal?
Wealth generation. Real estate consistently outperforms competing investment vehicles. For the last 18 years, housing has generated higher returns than the stock market, outperforming the S&P 500 2:1 since the turn of the century. Even when the stock market is at its best, real estate remains competitive; since 2011, both the S&P 500 and real estate have brought in roughly 12% in average annual returns. Wealth generated through cash flow, appreciation, and debt pay down on multifamily assets over time will amount to generational wealth that can be passed down to one’s children.
More control. Investing in multifamily real estate syndication allows an individual to decide which city, asset class, and business plan suits his or her goals and investing philosophy. It also puts the investor a short phone call or email away from those managing the asset to address any questions or concerns directly. Obviously, this is a stark difference to buying a large cap stock online where it is unlikely one would ever have a chance to correspond with management or have a choice in the company’s business plan.
Leverage with other people’s money. Leverage in the real estate market is a powerful tool. Even if real estate only tracks inflation over the long run, a 3% increase on a property where you put 20% down is a 15% cash-on-cash return. In five years you will have more than doubled your equity at this rate. Stocks, on the other hand, generate roughly 7% – 9% a year before expenses and taxes are removed.
Extraordinary tax advantages. The U.S. government is dedicated to providing affordable housing for its citizens, and therefor encourages investments in real estate. This encouragement is achieved through various tax incentives and write offs unique only to real estate. Our well educated and experienced management teams curate business plans to take full advantage of these tax benefits on each project, thereby passing tax incentives on to our investors.
Tangible asset. Real estate is something you can see, feel, and utilize. Life is about living, and real estate can provide a higher quality of life. Stocks aren’t event pieces of paper anymore, but ticker symbols and numbers. When the world comes to an end, you can seek shelter in your property. Real estate is one of the three pillars for survival, the other two being food and shelter.
Easier to analyze and quantify. While it may seem like a complicated business venture at first glance, multifamily real estate ultimately derives its value from only two variables: net income and capitalization rate. Stocks, on the other hand, require intimate knowledge of a company’s business model and often rely on numerous income streams with confusing expenses. There are countless ways for publicly traded companies to massage their numbers to make things look better than they really are e.g. adjusting accounts receivables, adding one off gains, and using various amortization or depreciation strategies to name a few.
Less volatility. One tremendous advantage to multifamily real estate is the long term stability of the asset class. For decades, the multifamily market has proven much less volatile than single family homes, the stock market, and precious metals. When the housing bubble popped in 2008, the delinquency rates on Freddie Mac single-family loans hit 4% in 2010. By contrast, delinquency on multifamily loans peaked at 0.4%. At its worst, the multifamily delinquency rate was 90% lower than that of residential real estate. As added proof to multifamily’s resilience, it should be noted the Dow Jones lost 54% of its value between October 2007 and December 2009. Many of our investors remember this tumultuous period vividly and have vowed to not let history repeat itself with their investments.
More insulated. Real estate is local. If you’ve made a good decision to buy in an economically strong region, you will be more insulated from the national economy or the global economy. A recession in Spain unlikely to affect the rent you can charge. We focus on lower cost, higher yield markets with stable population, job, and income growth receiving the benefits of long term demographic shifts away from expensive coastal cities.