Why Multifamily?
Rising Demand for Apartment Living
In 2023, the demand for apartments increased significantly, driven by strong job growth and improving consumer sentiment. Apartment absorption was positive for three consecutive quarters, with annual absorption reaching 127,000 units by the end of Q3 2023. This was the first positive annual figure since Q3 2022, indicating a recovery in the market (RealPage).
In 2024, demand is expected to stay strong due to continued economic growth, albeit at a slower pace, and persistent wage growth that outpaced rent increases for 16 consecutive months as of early 2024. However, the market also faces challenges from a substantial supply of new units, with over 600,000 new apartments expected to be delivered in 2024. This high supply is putting downward pressure on rents, despite the strong demand (RealPage) (NAAHQ).
The shift towards renting is expected to continue as these demographic and economic factors persist, fueling a growing market for apartment living in the 21st century (Brookings) (Institute for Fiscal Studies).
Sustained Low Vacancy Rates
Population growth in urban areas significantly influences real estate markets, particularly driving up demand for apartment living. This increased demand often results in lower vacancy rates, which, in turn, leads to improved cash flow and equity growth for investors. Such conditions enhance the potential for higher overall returns on investment. (Harvard Joint Center for Housing Studies) (CBRE).
These dynamics highlight why investors find urban real estate particularly attractive, as the combination of population growth, low vacancy rates, and rising rents often leads to better cash flow and long-term equity growth (Houzeo) (CBRE).
Diversification of Risk
Multifamily properties naturally spread out risk. Unlike single-family rentals where income stops without a tenant, multifamily units mitigate this risk across several tenants. If one unit is vacant, it only affects a small portion of the total income.
Adaptability to Market Changes
Multifamily investments offer greater adaptability to market shifts. Apartment buildings serve as affordable housing options that people turn to instead of buying. Additionally, you can update, repurpose, or renovate these properties to align with changing market trends and needs.
Since the 1950s, real estate has consistently performed better than stocks, bonds, and other securities. Investing in apartments is a prudent decision for those seeking to avoid high-risk ventures.
Multifamily investments offer impressive equity growth and yield anticipated monthly income surpassing that of stocks and bonds. This makes apartments an even more attractive option for maximizing investment returns while minimizing portfolio risk.
Depreciation
Multifamily investors can depreciate the value of the property over time, which allows them to deduct a portion of the property's value from their taxable income each year. Depreciation can be a significant tax benefit for multifamily investors, as it can offset some of the income generated by the property.
Bonus Depreciation
Bonus depreciation is a pivotal element for your tax strategy, permitting additional first-year deductions for a qualifying property. This accelerates depreciation when paired with cost segregation, intensifying deductions and improving cash flow. The direct benefits of this approach are evident on your K-1 statement, underscoring the financial advantages of our detailed asset management and tax strategies.
Cost Segregation
Cost segregation boosts tax savings in multifamily investing by identifying assets for accelerated depreciation over 5, 7, or 15 years, versus the standard 27.5 years. This strategy sharpens deductions, cuts taxes, and Increases cash flow, with clear impacts on your K-1 statement.
Tax Advantages
