We have been investing in real estate since 2000 and experienced the 2008 mortgage crises firsthand. While it caused a massive downturn in the single-family market, multifamily remained relatively unscathed, with rents decreasing just a few percentage points.
In 2008 through 2011, even though people lost their homes, they still needed shelter. Many turned to less expensive apartments.
Apartments hedge against inflation because leases are renewed yearly, keeping up with inflation.
Leases are typically renewed once a year and rental rates adjust with prevailing market conditions. This causes rents to rise in times of inflation and ensures landlords can keep up with rising prices while still maintaining cash flow.
Currently, there is a home ownership affordability crisis – pushing our country into a Renter’s Nation.
The homeownership affordability crisis is pushing our country towards a renter’s nation, making apartment syndications an even more attractive investment option in the long-term.
Investing in apartments can provide you with steady cash flow and the potential for capital appreciation and hedging against inflation. We strongly believe everybody should own rental property.
There is a lack of supply of apartments projected for decades to come.
Many industry experts and economists are forecasting the apartment shortage trend to continue. This means that we expected a lack of supply in the market for decades, especially as demand increases and new construction projects are hampered by rising costs and increasing regulations. This can lead to higher prices and increased competition amongst investors looking to enter the multifamily market.
Municipalities are adding regulations further driving up the cost of construction.
Municipalities are making it increasingly difficult to construct new apartments because of the new regulations they are implementing. These regulations have driven up development costs making it impossible to build work force housing in many areas like Seattle, San Francisco, and Portland.
Since no new workforce housing is coming on the market, the older Class C apartments are seeing an increase in rent. This is driving up the cost to purchase Class C apartments and causing apartments to become a limited commodity.
Tax Benefits for real estate are amazing with bonus depreciation, opportunity zones and tax abatements.
Sometimes, with bonus depreciation, investors can take a larger deduction up front to offset their income and reduce their tax obligations.
There is an adage: “PIGs can only be offset by PALs”. Passive Income Gains can only be offset by Passive Activity Losses (not active income).
Additionally, Opportunity Zones provide substantial tax incentives for investments in economically distressed areas. However, in some cities experiencing economic growth, the Governors in a few states have made entire cities an Opportunity Zone. Even those areas experiencing economic growth, such as the area around the Cleveland Clinic in Cleveland, OH. Even though there is a major expansion of the hospital bringing in 20,000 new jobs, the area around the clinic is named an opportunity zone, allowing investors to delay paying capital gains taxes on the funds they invested into the area.
Municipalities may offer Tax Abatements to encourage businesses and developers to invest in their communities.
As always, talk to your accountant who knows your own unique situation, they can help you strategically reduce your taxes to near zero levels by investing smartly in real estate.
Over time real estate appreciates in value.
Real estate is a proven asset class that has been steadily appreciating in value. This stability and appreciation is attributed to the laws of supply and demand.
With population growth expected to persist, alongside constraints on supply because of rising construction material costs and regulatory barriers, the demand for real estate will continue to increase. As a result, property values are likely to rise as a greater number of people compete or a limited amount of space.
In Conclusion:
Don’t wait to buy real estate, buy real estate and wait!
The adage “Don’t wait to buy real estate, buy real estate and wait!” is still as true today as it was when it was first uttered by Will Rogers.
Andrew Carnegie said, “ninety percent of all millionaires become so through owning real estate.”
Real estate has consistently proven to be among the top methods of generating wealth over time. Investing can provide financial security and stability in contract to more volatile investments like stocks.
Investing passively in apartment syndications is a great option if you are looking to outpace inflation, enjoy your free time, and not have all your eggs in the volatile stock market basket.
We LOVE passively investing in Real Estate! We have been actively investing since 2000, and still do. But, once we started passively investing, we gained our time back, and continue to grow our wealth. We strive to outpace inflation by investing in areas that are in the path of progress, in business and landlord friendly municipalities, and in areas with explosive growth in manufacturing and job creation.
If you want to learn how to passively invest in real estate to create a stable financial future and time to pursue other goals and interests, check out one of our courses where we share our expertise to help you get started!