Ongoing Demand
- According to the Harvard University Joint Center for Housing Studies, the number of renter households is projected to increase by nearly 500,000 annually over the ten years from 2015 to 2025. A growing number of residents, especially baby boomers and millennials, are choosing to rent rather than buy, for a life-style that offers more flexibility, convenience, and community.
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- The Bureau of Economic Analysis estimates that households spend approximately $519 billion on rent annually, accounting for about 2.8 percent of GDP.
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Ability to Purposefully Increase the Asset’s Value
- Similar to a small business, the value of an apartment building, as an asset, can be increased based on fundamentals that are within the owner’s control. For example, an apartment’s Net Operating Income can be improved by lowering operational expenses. The increase in NOI will therefore increase the asset’s overall value.
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- Equity in the asset is continually increasing as the property’s income covers the debt payments and reduces the debt balance on the property.
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Passive and Predictable Cash Flow
- Multifamily real estate as an investment asset can provide a regular and dependable income stream that should produce positive cash flow higher than typical stock dividend yields.
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- The use of professional operations and property management can make multifamily real estate a truly passive investment, in which investors can enjoy the benefits of steady cash flow without the worries of day-to-day rental management.
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Hedge Against Market Volatility
- While real estate does go through economic cycles, it does not historically fluctuate with the daily and weekly volatility of other markets such as stocks and bonds. The overall value of a well-managed and solid performing apartment community does not swing by millions of dollars from day-to-day simply because the stock market is down in China or a financial pundit made a statement on the news.
Tax Planning
- Investment in real estate can provide numerous tax benefits, such as depreciation accelerations that can shield some of the income to investors.
An Investment in Real Life Communities
- Investing in multifamily real estate means investing in a tangible asset that holds real-life value and meaning for those it serves. This includes the investors, residents, managers, and countless small businesses and others who support the community.