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Why Multifamily Investing?

Writer's picture: Ravante BabbittRavante Babbitt

Updated: Oct 9, 2021

Multifamily investing is primarily looked at as an alternate to the stock market. It provides a multitude of benefits that the stock market does not.

  1. The top benefit (in my opinion) being cashflow. As a passive investor in the stock market, you are at the mercy of the market itself. The only real payouts are from dividend stocks, which unless you have invested a large amount, those are not getting you much monthly or quarterly income. With multifamily, you are getting distributions each month or quarter, from the net income of the property. So once all expenses and bills are paid each month, the rest goes to the investors!

  2. It is a less-risky asset class. As you start scaling up, you have multiple people, or units that are paying their rent each month. So, even if you have tenets move out, the others are still going to be paying rent. This makes the risk lower because it's spread out more vs single family homes, where if that tenet leaves, you are stuck paying expenses and mortgage still, and nothing is offsetting that until you get someone else moved in.

  3. There are multiple tax benefits in multi-family. Depreciation, which is the valuing of a property getting older and needing repairs to various things, can offset the taxable income of a property. This can result in almost making all the passive income from an investment not be taxed. Since depreciation is counted as a loss on paper, it will help offset the income made from the property. To take it a step further, a cost-segregation study can be done as well. This itemizes every aspect of the building from the wiring to the roof, to the windows. Everything that is in or part of the building has differing depreciating timeframes, which can then be taken earlier, rather than the standard depreciation timeframe of 27.5 years.

These three things are what makes multi-family investing such a great place to put your money. It gets you passive income each month, which is taxed at a lower rate than active income. It's less volatile compared to the stock market. Then, can further reduce your tax bill with depreciation! This is why we are so passionate about multifamily!

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