Why multifamily?

Multifamily real estate

Investing in multifamily can be a reliable way to earn income and build equity. The growing population means more people will be looking for apartments, providing investors with a steady stream of rental income as well as potential for financial gain. Investing in multifamily provides both a secure asset and the chance of reward.

Let’s explore why investing in multifamily properties is a great way to earn passive income, can diversify your portfolio and provide long term wealth.

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Real estate vs stocks

When examining the past, The Dot-Bomb Recession in 2001 and the Great Recession from 2007-2009 both caused a slump in Total Stock Shares (blue), while Average Sales Price of Houses Sold (red) declined more gradually.

Last year marked the onset of the COVID-19 Recession, where real estate prices boomed in the second half of 2020, but stock prices fell during the first half. The first quarter of 2021 saw a steady rise in stock prices that topped year-over-year home price growth. Recently however, stocks have taken a sharp downturn while home prices have also decreased due to high interest rates. This pattern has been seen before during economic contractions and illustrates that real estate is a less volatile investment which minimizes riskiness to your portfolio.

demand multi family numbers climb census chart graph proof
Organization for Economic Co-operation and Development, Total Share Prices for All Shares for the United States [SPASTT01USQ661N], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/SPASTT01USQ661N, December 28, 2022. U.S. Census Bureau and U.S. Department of Housing and Urban Development, Average Sales Price of Houses Sold for the United States [ASPUS], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ASPUS, December 28, 2022.

A road towards financial freedom

Investing in multifamily real estate is a great way to gain financial freedom and long-term wealth. You will receive passive cash flow that increases with higher rental rates and occupancy. As time passes, you will also benefit from property appreciation, while diversifying your portfolio. Most importantly, you can reclaim your most valuable asset – time – to spend quality moments with family or however else you choose.

Demand for Apartments continue to climb

We can see in this new graph that demand for apartments is at an all time high. This will continue to push as population grows. In return, this will cause an increase in demand for apartments, leading to lower vacancy rates and higher market rents. This is beneficial for investors as it results in higher returns on their investments.

demand multi family numbers climb census chart graph proof
U.S. Census Bureau, Housing Inventory Estimate: Renter Occupied Housing Units in the United States [ERNTOCCUSQ176N], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ERNTOCCUSQ176N, December 28, 2022.

Multifamily vs
single family

Multifamily real estate offers more potential for cash flow than single family homes. Since there are multiple units, the risk of vacancy is reduced, making for a relatively stable investment regardless of market conditions or interest rate changes. Furthermore, multifamily investments tend to be more liquid than single family homes as they often generate higher returns on investments and can allow for quicker exits when needed.

Overall, multifamily real estate offers a great opportunity for investors to diversify their portfolio, take advantage of economies of scale, and potentially generate higher returns with lower risk than single family homes.

benefits of multifamily

Hedge against inflation

Multifamily properties tend to increase in value with inflation, providing investors with both an income stream and asset growth. Additionally, because they are generally less volatile than stocks and bonds, investment properties provide more stability against downturns in the market.

protect against recession

Multifamily properties are attractive investments since they are more resilient during recessions. They also bring diversification benefits to an investment portfolio, while having lower vacancy rates than other real estate investments. This results in a steady revenue stream, regardless of the economic climate.

Tax Advantages

Investing in multifamily properties can help lower taxes due to the deductions and credits available. By taking advantage of depreciation and tax incentives, investors can lower the amount they owe and maximize their returns.

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