Why Multifamily and Commercial Real Estate Properties Generate Better Returns for Wealthy Investors
In recent months, we have seen how unpredictable the stock market can be. Wall Street experiences large spikes followed by steep valleys. Smart investors are building portfolios based around commercial real estate and multifamily housing, which guarantees passive revenue and quickly builds wealth that can span generations.
The Advantages of Multifamily Property Investments
Multifamily properties such as duplexes, triplexes, and especially large apartment complexes provide debt leverage, control, and tax benefits. An investor can make an initial property acquisition for a fraction of the cost, and the revenue generated from the rental units can easily pay off any financing and commercial mortgage payments while still providing a tidy sum that goes directly into the investor’s bank account as profit. For the cost of the initial down payment, property investors can start generating revenue from tenants and seeing a steady return on investment without having to leave anything to chance. Multifamily properties allow investors to maintain control, instead of leaving things to arbitrary factors, as with the stock market.
Multifamily Investments and Taxes
Many investors see big tax benefits in multifamily and commercial real estate. While land doesn’t depreciate, buildings do. The depreciation on rentals properties can be claimed over 27 years, allowing investors to retain their earnings. Some investors go one step further and claim depreciation on furniture, appliances, parking structures, fixtures, landscaping, and more. There are additional tax benefits as well, in the form of deductions for repairs and improvements. Carefully timed repairs spread out over the years can help investors retain revenue and prevent large tax expenses every year. Many investors only pay a small percentage on their earnings by using the many IRS tax benefits offered on commercial real estate.
Debt in multifamily properties and commercial real estate is tied to amortization, which can be leveraged to build wealth. For instance, debt placed on a multifamily rental is paid by the tenants occupying the units. If the value of the property remains the same, the revenue used to pay down the balance on a loan will be seen as an increase in equity. Adding that amount to the after-tax cash flow yields and all-inclusive return on investment. It cannot be overstated that property investors have control over whether the value of a property stays the same or increases in value. Investors can increase revenue by raising the rent, charging for utilities, or adding others sources of income from the property. On the other side of the coin, investors can decrease expenses by reducing vacancies, putting in energy efficient utilities, and restructuring operating costs.
There is always a need for commercial real estate by businesses and private residents. Multifamily rentals place more control in the hands of investors than stocks and commodities and offer more tax benefits to yield higher returns. If you want to build your investment portfolio while simultaneously reducing your risk, contact CounselPro Lending. We specialize in investment strategies involving multifamily and commercial real estate. Contact our offices today to learn more.