Investing in real estate is one of the best strategies for growing long-term wealth. As a real estate investor, you can choose to invest either in single-family or multifamily homes. Multifamily homes or apartments are properties that have more than one rental unit. Apartment investing comes with several benefits and if you are planning to invest in real estate, the following are some of the reasons why you should consider apartment investing in the USA.
- Tax benefits
When you invest in apartments, it’s possible to reduce the amount of taxable income through tax depreciation. According to the US tax code, real estate investors can benefit from unlimited mortgage interest deductions and depreciation expenses. In some instances, you can find that tax depreciation expense completely eliminates the annual taxable income.
When selling your apartment property, the IRS also grants real estate investors the 1031 provision that gives investors power to exchange with another investment property and defer all other taxable gains in the future.
- Reliable income
Apartments are rental properties that generate predictable and regular monthly income. When you invest your money in apartments, you are assured of a continuous stream of income that is less volatile compared to investing in stocks. With a regular reliable income source, you can be able to plan your finances.
- Economies of scale
Large apartments have many rentable units all under one building complex. Therefore, you will have more renters sharing your operational costs as well as the mortgage loans. With multiple rentable units, you will minimize your investment risks as you will have a very minimal vacancy rate. Also, multiple rental units translate to higher cash flow and less operational cost for every unit.
- Reduced debt through rental income
Property net operating income (NOI) reduces the debt on the apartment property. To get NOI, you take the gross income and you less all expenses incurred before debt. Rental income generated from apartment investing will continuously go towards reducing the debt balance thus, helping investors build equity on their property investment.
- Apartment property appreciates in value
Multifamily properties appreciate in value at a higher rate compared to other real estate properties. When the rental prices increases, the net operating income grows with the same margin enabling real estate investors to offer more effective property management. When investing in apartments, it’s easier to grow your portfolio investment since all the rentable units are under one property complex.
- Inflation hedge
When you invest in apartments, the real estate property will provide hedging against inflation compared to investing in other asset classes. In most cases, when inflation rises, the price of multifamily properties will also increase. Real estate properties are less volatile compared to investing in stocks and other assets.
Investing in apartments in the USA will remain a lucrative venture as the need for housing continues to increase as the population grows.
When you invest in a multifamily property, you are assured of both short and long-term financial gains. The key to a successful apartment investing journey is to understand the lifestyle and demographic trends so that you can invest in properties that will be in high demand.