Why invest in apartments? It is said that apartment investing done right is like “creating your personal pension”. Smart investing then, accomplishes 3 things when done well: one, create wealth over time; two, be passive, meaning that it doesn’t require you to be “hands-on every day”; and three, it should produce “mailbox” money, meaning that you should receive cash flow distribution checks on a consistent basis. Are you? If not, read on.
Why Invest in Apartments?
Dependable Income – Generating steady, strong, increasing, and partly tax-sheltered cash flow is the by-product of a well-run strategy for apartment building investing.
Asset Appreciation – By raising rental income on a consistent basis, making property improvements, being located in the best cities, and employing top-notch property management, your apartment building value can multiply over time. That’s the inherent beauty of apartment ownership.
Capital Preservation – It is said that 90% of the Forbes 400 index of the world’s wealthiest people either made or retained their wealth through real estate. But not just any real estate. These people own high-quality, income-producing real estate, like apartment communities. The ultra-wealthy hold real estate long term, because they know that is how to preserve their wealth.
Inflation Hedge – Real estate investments have historically shown the highest correlation to inflation when compared to other asset classes such as the S&P 500, 10-year treasuries, and corporate bonds. As generally speaking, when inflation occurs, the price of real estate, particularly apartment buildings will also rise.
Tax Shelter – The US Tax code benefits apartment building owners in a number of ways including no limit mortgage interest deductions and depreciation accelerations that can shield a portion of the positive cash flow generated or paid out to investors. At the time of sale, IRS allows investors a 1031 provision, allowing investors to exchange into a like kind instrument and defer all taxable gains into the future. This is a tool of the wealthy.
Generational Wealth – superior returns due to A property’s combination of stable revenue (from rents), capital gains (resulting from increased property values), principal paydown (from renters paying down loans) and tax savings (thanks to the investment’s special flow-through structure) may provide returns.
Demand – There is still an unfulfilled demand that is expected to be with us for a long time. Seventy-five million millennials plus another 75 million baby boomers is our “ace in the hole” – that’s our pool of renters. The apartment building investment business is poised to perform better than any other asset class because of this strong and predictable demand. More people are renting today than at any time in the past 51 years.
One Deal Is All It Takes – one well-executed apartment building investment can change your financial life and your family’s for the rest of your lives. Producing what is called “generational wealth” is what apartment building investors have been doing for decades.