Why Passive Investors enjoy Multi-Family partnerships
Of all the ways to passively invest in real estate there is one asset that stands above all the others. Multi-Family Apartments is that asset. Apartments are the best asset to invest in for passive investors for some great reasons.
Everyone needs a place to live
This one is self-explanatory, yet I am expanding on it because not every apartment is created equal. The fact that everyone needs a place to live doesn’t mean they will live just anywhere. Being a great place to live in a great location can allow you get better returns on your money.
Economies of Scale
As properties get bigger, you can spread certain costs over more units, which lowers your operating costs as a percentage of revenue. As the buildings get bigger, you can absorb the costs of more staffing and services across more units. More staff can allow for more efficiencies and does not require the ownership to be as involved. Having a large number of units also is less affected by vacancy. This prevents large disruptions to cash flow.
Apartments enjoy a stronger occupancy than some other real estate investments. When compared to office buildings, retail space and some industrial investments, apartments historically maintain higher occupancy rates and can be easier to fill vacancy. This allows the cashflow to stay more stable. Certain other commercial investments can have vacancies for longer periods of time and can greatly disrupt cash flow.
Multiple Ways to increase revenue
With some real estate investments, there can only be one or two ways to make money. Some properties only offer rent as a means of income. Apartments offer more ways. You can make money from rent, laundry, appliance rentals, covered parking, garage spaces, valet services just to name some of them. Depending on the property there are several other ways to make money. This makes apartments more unique and a great way to increase revenue.
Unlike Mobile Home Parks, multi-family apartments are more plentiful. As an investor this gives more opportunities to buy buildings. This is important because when you want to get a return on your money, you do not want to sit around and wait for what could be years to find the right opportunities.
Great For Partnerships
Some investments are better than others for partnering on. Because multi family has numerous ways to maintain high occupancy and increase revenue, it is ideal for partnerships because it has less of a disruption to the cashflow. Additionally, those factors also allow it to increase the value of the property, which can allow for a higher selling price when it is time to sell.
As with most real estate investments there comes with it tax advantages. Depending on your partnership structure a passive investor may be able to take advantage of interest and depreciation deductions as well as other potential deductions.
When you combine all these benefits with the cash flow, equity growth and other benefits of being a partner in Apartments, you will see why it can be a great investment.
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