Why You Should Be Investing In Big Apartments
Depending on your personal investment strategy, some real estate investment opportunities are better than others. Many investors like to fill their portfolios with a variety of short-term and long-term investments. Short-term investors provide a quick turnover while giving investors access to the funds that they need. Conversely, long-term investments create ongoing, often passive income that gives investors the opportunity to collect regular funds with minimal work.
Obviously, large apartment complexes are a great tool for investors looking for a long-term option. Knowing how these large apartment complexes can benefit your own financial goals is an important part of deciding when to add one of these multifamily units to your portfolio.
Reliable Income Stream
Real estate has long been considered one of the most reliable investment opportunities. In fact, roughly 90% of the millionaires in the world have real estate somewhere in their portfolio. While all real estate has the potential to generate income, some options are simply more reliable than others.
For instance, if you opt for fix-and-flip homes that you want to sell, you’re often at the mercy of the real estate market in the area where you’re fixing and flipping. In contrast, apartment complexes provide a steady stream of income without the hassle of rehabbing a property, listing it, and waiting for a buyer. As long as there are renters in your apartments, you are making money.
There Are Tax Benefits
Savvy investors understand the importance of using Federal Tax Codes to their benefit. Regardless of the asset class that you’ve invested in, knowing how to offset or defer the taxes that you owe can put you in a great position to increase your own net worth while keeping more of your money in your pocket at the end of the year.
Since large apartment complexes are considered a piece of commercial real estate, these units can be bought and sold under a 1031 exchange. 1031 exchanges mean that you can use the funds that you generated from the sale of another commercial property to purchase the apartment complex, without having to claim those funds as capital gains on your taxes.
Even if you don’t do a 1031 exchange to purchase a property, depreciation of the building, interest owed on a mortgage, and other costs associated with owning an apartment complex can be tax-deductible. Apartment complexes are a wonderful opportunity for investors to offset some earned income through completely legal tax breaks.
The Opportunity for Passive Income
Before we dive into how large apartment complexes can provide passive income, we should clarify that they don’t have to be passive investments. You can certainly tackle the maintenance issues that come up with an apartment complex on your own. You’re certainly entitled to handle your own taxes, rent collection, and other responsibilities that you’ll need to account for.
However, you can also hire all of that out. Hiring a property management company can turn your investment into a completely passive source of income. Many of these companies handle rent collection, advertising, tenant screening, maintenance, and more. This means that you can sit back and collect the monthly profits generated by your property without putting in any of the work necessary to make the building operate.
Opportunities for Growth
Once you’ve positioned yourself as a successful multifamily real estate investor, it’s possible for you to quickly scale this business venture. In some cases, you can bring in other investors who want to put some cash into the building without owning it outright. Whether they don’t have the funds necessary to purchase an apartment complex themselves or they just don’t want to be responsible for it, your investment can become an appealing opportunity for other investors.
When outside investors purchase a share of your apartment complex, you receive the funds that you need to make additional investments. Depending on the size of the complex, you may not even notice a large decrease in your personal earnings.
Apartment complexes are a great addition to any portfolio. Large apartment complexes are even better. For investors who are thinking about their own financial future, the financial stability of their heirs, and more, big apartments are big business.