Are you searching for information on multifamily vs. stocks because you’re thinking about investing in multifamily and aren’t sure if it’s the right decision for you to make or not? If so, you have come to the right place!
There’s no doubt that in 2020 more investors than ever before are turning to multi-family investment properties to protect the net worth that they have left because it’s estimated that the United States equities market has lost close to $12 trillion in capitalization since February 19th, and the losses have not stopped.
Multi-family investment properties continue to be the “haven” that they’ve always been that investors can turn to protect their net worth during times of record economic uncertainty.
If you’ve been sitting on the fence debating if you should get started with investing in multifamily properties, this article provides you with a wide variety of reasons why multi-family investment properties make the best investment in 2020 and Beyond.
Multifamily Vs. Stocks – Cash Flow And Total Return On Investment
One of the first reasons why you should consider investing in multifamily properties right now is the fact that multi-family properties like condos, townhomes, and apartments offer better cash flow and return on investment than stocks.
Many people think that stocks provide a good return on investment but the reality is that stocks pay very little in terms of cash flow or dividends to shareholders since they generate the majority of their returns just from capital appreciation.
The great thing about the cash flow that you will earn after investing in multifamily properties is that your cash flow will not be dependent upon how the stock market is doing, or how the economy is performing.
Multi-family investment properties will always be in demand because, people will always need a place to live, so as long as you invest in multifamily properties that offer your tenants good value, you can always expect to have tenants living in your properties regardless of the condition of the economy, jobs market, or what’s happening in the world.
Leverage Your Existing Properties In Your Portfolio To Build Wealth
Another great reason to consider investing in multifamily rental properties that you can leverage your existing multifamily properties to build wealth.
Many investors have been leveraging their existing multi-family properties for decades when they refinance those properties and utilize the funds from them to purchase other multifamily properties.
Leveraging it is an effective strategy because it will enable you to start generating consistent monthly cash-flow from your Multifamily investment instead of having to wait for a prolonged period to start earning dividends from your stock investments.
Less Risk Than Owning Stocks
Over the last 10 years, stocks may have looked “sexy” on paper the truth is that investing in the stock market always comes with risk. Why? The answer is simple, the nature of the stock market is volatility and it’s subject to a wide variety of factors that can affect its performance including speculation and what’s happening in the world.
Even though the stock market has been a bull market for the last 10 years, regardless of what the Federal Reserve has been doing to prolong the bull market, the true nature of the stock market cannot be avoided and the Bear Market will eventually return, as it did in 2008.
Once you own an apartment building, condo, or town home, you will not have to worry about the same risks that Stock market investors have to deal with, especially during times of economic uncertainty.
As long as you take the time to either hire a property management company to manage the rental properties in your portfolio, or you invest the time in properly screening your tenants.
You can count on getting paid rent from your tenants consistently while having tenants living your rental property who will respect the property and treated as their own.
Yes, owning rental properties may indeed come with more work compared to the work that you would have to invest in owning stock. The long-term benefits of owning a physical asset that will continue providing you with consistent monthly cash flow for years to come far outweigh the risks that you face when you invest in the stock market.
Rental properties also make an excellent hedge against inflation because, as long as you adjust the rents that your tenants pay every month for inflation, you can always count on your properties earning what they are worth.
You Have More Control Over Your Investment Than You Would When Owning Stocks
With the volatility of the stock market, investors have to be ready for having a lack of control which will affect the value of their investments and also be responsible for record losses like the losses that investors saw in 2008 following the collapse of the stock market and economy.
With the level of control that you will enjoy from investing in multifamily properties, you will have greater control over your asset and the profits that you enjoy from them on an annual basis especially when you invest money into your properties to increase their value and ultimately increase rents as well.
Tax benefits are without a doubt another excellent reason to invest in multifamily rental properties because you can have the ability to depreciate them during your first year. You’ll also be able to deduct any other expenses related to your property including interest from your income as well.
As with any multi-family real estate investment, the amount of money that you pay in taxes is different from each property but most Real Estate Investors over the years have been able to earn cash flow from the rental properties that is almost completely tax-free.
Yes, it’s true that if you’re a stock investor you can generally benefit from the liquidity of stocks with just a few clicks of your mouse because you can buy low and sell High.
During times of economic uncertainty, like those that we’ve faced within the last 30 days, that liquidity benefits of owning stocks go out the door.
Multi-family rental properties however remain an asset that you can sell and generate cash flow from since as long as the rental is earning rental income, there will always be an investor who wants to purchase it.
After reading this article of you still may not be convinced about the benefits of investing in multifamily properties versus the stock market, and that’s okay. Rental properties are not for everyone because they do require more work and responsibility than stocks to you but there’s also no denying that the return on investment that you will enjoy with multifamily properties is always going to be there.
How To Get Started Investing In Multifamily Properties
If you’re ready to get started with investing in multifamily properties after reading this article, there are a wide variety of ways that you can get started with purchasing your first multi-family property including the following:
Purchase Your First Rental Property Yourself – This is by far one of the most common ways that new multifamily investors get started with buying their first properties.
The good news about multi-family is that it’s possible to invest in a small apartment building, condo, or townhome with as little as 3% down (if you use an FHA loan) and intend on living in one of the units yourself.
When searching for a multi-family investment property, make sure that you follow the due diligence tips which we’ve listed on this blog in previous posts. You should also be on the lookout for properties in excellent locations, close to public transportation, shops, stores and Employers in the community where those properties are located.
Once you purchased a multi-family investment property, it’s also important to remember that you should hire the services of a property manager to professionally manage that rental property for you.
A property manager will save you the time, money and hassle of managing that rental property yourself so that you can focus on growing your portfolio of investment properties without having to deal with the hassle of day-to-day Property Management
Even though he’s been one of the most famous stock market investors in the United States over the last 100 years, Warren Buffett said this about investing in rental properties as recently as 2012:
“If I had a way to buy a couple hundred thousand single-family homes and have a way of managing them, I would load upon them. I would take mortgages at very low rates… It is a very attractive asset class… If I was an investor who was a handy type, which I am not, I would buy a couple of them at distressed prices and find renters and again take a 30-year mortgage, it is a leveraged way to own a cheap asset. I think that is probably as attractive as an investment you can make.”
Invest In A REIT –
A Real Estate Investment Trust (REIT) it’s a corporation that generates all of its income with the collection of rents and sales of rental properties that it owns.
When investing in a REIT, you don’t have to deal with any of that day to day hassles or struggle it comes from owning an investment property yourself.
Before investing in a REIT, make sure you verify the following information about the company.
Review their management – Make sure that the management of that Real Estate Investment Trust has a proven track record of trust when it comes to you picking the right Investments.
Diversification – Another important thing to do when reviewing a REIT is to verify that they have a diverse portfolio property.
When a REIT portfolio is diversified, investors can have confidence that their earnings will stay consistent over time regardless of the condition of the economy.
Earnings – Last of all, the most important is cash flow. When investing in a REIT, you also want to review the funds that they receive from operations and also the cash that they have available for distribution. Both of these financial factors will help you to confirm the overall performance of the REIT and provide you with confidence if it is a wise investment for you to make or not.
Partner With An Accredited investor
Not interested in investing in multi-family rental properties yourself, or investing in a REIT? If so, another way to get started with investing in multi-family rental property uses to partner with an accredited investor like myself.
I’m currently invested in projects across the United States work over $79,000,000 and am searching for accredited investors who are ready to get started with investing in multifamily properties
To learn more about passive investment opportunities for accredited investors, or to learn more about working with me, please click here.