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- While multifamily properties are capital intensive, group purchasing allows multiple investors to combine their capital with other investors to purchase larger properties.
- This allows you to own shares of the apartment complex and benefit from its collective revenue and tax advantages.
- A multifamily acquisition is more similar to buying a business than a single-family home.
- Because of that, investors can leverage capital more strategically.
- For example, any investor who owns more than 20% of the property acts as the guarantor on any bank financing.
- This means that everyone else gets to benefit from the financing without guaranteeing any of the loans.
- You may have heard that multifamily investing benefits from economies of scale. Here’s what that means:
- When you purchase a single-family home, you are acquiring a single unit. To acquire more units, you have to go out and buy another single-family home repeatedly. It’s a slow, painful process to grow your wealth.
- With multifamily, you are purchasing dozens, hundreds, or thousands of units with each acquisition. When you acquire this many units and make improvements to the property, you receive a disproportionately high return due to the size of the investment. It is a terrific way to scale your investment and increase your net worth.
- Great question. We work with some of the nation’s top property management companies to ensure that your investment is maintained correctly.
- Additionally, we always seek to increase the property’s value and do this by investing in property improvements and by reducing operating costs.
- This makes the investment much more valuable for you and attractive to investors who may want to acquire the property in the future.
- Here’s another reason why we love multifamily investing. You can get all of your investment back while still retaining ownership of the property.
- After making property improvements and/or lowering operating expenses, we then refinance the property and pay you back directly. If we decide to hold onto the property long-term, we will refinance every 2-3 years until we sell the property. It’s a fantastic strategy that has made many multifamily investors remarkably wealthy.
- Another great benefit of multifamily investing is that you can enjoy passive income well after you have received all of your investment back.
- Passive income distributions typically occur within the first 180 days after acquisition.
- As the property becomes more efficient and profitable, your passive income distribution amounts can increase year over year.
- There are various types of tax advantages with multifamily, which include:
- Cost segregation
- Deducting operating expenses
- Deducting capital expenses
- Property depreciation
If you are interested in learning more about how you can increase your net worth and lower your taxes, download our PDF on how to do precisely that!
- While there are never any guarantees, multifamily is considered one of the more predictable asset classes available to investors.
- Here’s why.
- When you invest in multifamily, you invest in an income-producing asset that can be improved upon and made more profitable. That means investors have more control over their investment and can better influence the short-term and long-term outcomes.
- Compare that to stocks, bonds, and mutual funds, and it is easy to see why investors love adding many multifamily properties to their portfolios.
- Multifamily properties are valued according to their net operating income (NOI). Fortunately for investors, NOI can significantly increase when you reduce your operating expenses, raise rents, and become even more profitable.
- This gives investors more power and control over their investments and serves as an excellent hedge against inflation.
- Yes! Multifamily properties are self-directed IRA qualified.
- You can invest in multifamily using any of the following plans:
- Traditional IRA
- Roth IRA
- Traditional 401K
- 401 K Roth
- And more!