Cash Flow - Passive Income
Multifamily Real Estate is a tangible asset that provides passive income generation each month. Investors in multifamily properties receive two types of profit during the hold period, (the time between when the property is purchased and the time when it is ultimately sold.) The first is monthly income from rents, fees, etc. and the second is profits recognized from appreciation when the property sells. Unlike fixed-income investments, multifamily real estate often offers a higher potential for returns.
Tax Benefits
Investors benefit from tax deductions and incentives, including deductions on mortgage interest, property taxes, and depreciation. These tax advantages can increase after-tax cash flow and enhance the passive income generated by real estate investments. Several loopholes in tax code actually allow investors to pay little to no taxes at all. An LLC typically owns the multifamily property and investors purchase shares in the LLC. When profits are distributed to the investors, investors are able to use "pass-through taxation”. At tax time, this is a great benefit.
Note: Our "biggest pumpkin" is not tax advising, so we recommend reaching out to your tax or business professional for counsel.
Appreciation
The value of assets has consistently increased over the last 100 years, typically increasing between 8-12% per year. In addition, the typical equity multiple (total cash distributions received from an investment) calculated over a 5-year hold in commercial real estate is 2X, which means for every dollar invested, 2 dollars is earned.
Inflation Protection
Multifamily properties are one of the most secure and best-performing assets in the last hundred years. There are now more households in the U.S. renting than at any time in the past 50 years. The demand for multifamily properties is increasing and this trend is not expected to change anytime soon.