WHAT MAKES MULTI-FAMILY AFFORDABLE HOUSING INVESTMENTS SO GOOD?
The real estate market has plenty of opportunities for making big gains, especially with the market at a low period in the economic cycle. While now is a great time to invest in assets that are stable and have very consistent returns, buying and owning real estate is complicated and therefore it is crucial to be well informed.
The first thing one should remember when investing in real estate is that there is a big difference between buying a property as your own residence and buying an investment property. When investing one should put emotions aside and think of what makes sense and what has potential of generating the required return.
MAN Holdings LLC believes that real estate, and particularly multifamily real estate is a powerful and solid investment and has a lot of advantages over investing in financial instruments for the following reasons.
Income – Real estate generates income in terms of rent revenue to offset the costs of ownership, maintenance and debt service. Investors seek for a positive cash flow for all properties.
Superior returns – real estate generates superior rate of returns than investing in bonds and stocks, Leverage – while if you want to buy a stock, you have to pay the full value at the time you place the buy order, with real estate you can control the whole property by only paying a fraction of its total value. Most “conventional” mortgages require 25% down, but it can be as low as 5% depending on the location.
Amortization – when your tenants pay you rent, you use that money to pay your mortgage payments, thus increasing the equity you hold and your net worth. especially in the current downturn.
Tax advantages – Real estate offers many tax advantages but one should consult with a tax advisor on this issue as tax advantages vary from individual to individual. A main advantage is the ability to depreciate the value of the property (excluding land value) over time. Depreciation does not cost you any money and yet it can provide a tax loss to offset your income.
Increasing value – With real estate you can take actions to easily increase the value of you assets. Making some cosmetic improvements, dividing larger spaces to smaller once and charging more per square foot, and putting some effort into marketing can easily increase your revenue and the resell value of your property.
When prices were high it was the right time to sell. Now, with low prices and low interest rates – it is the right time to buy.
With a new cycle of uncertainty and volatility in the markets, investors are likely to move their capital from stock and other financial instruments to hard assets.
Despite weak economy, the real estate sector is starting to recover. There are supply constraints and a growing demand for rentals. The nationwide vacancy is at a low 5.9% and there is very little new construction. There are three million new Americans annually requiring at least one million new units. This leads to rental increases as high as 15% in areas like San Jose, San Francisco, New York.