You might think that working your W-2 job will use up all of the time and energy that you could be putting toward your multifamily real estate investing goals, but that's not necessarily true.
In fact, your job and your entrepreneurial journey can work together for your advantage.
Real Estate Syndication and the Benefits for a W-2 Employee
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If you plan and budget carefully, you can use part of your W-2 wages to fund your investment career, and there are great benefits to investing in a syndication while you're working at your job.
Tax Deductions
Investing in Multifamily real estate offers tax benefits, unlike any other investing class.
Let’s say you invest $1M in the stock market and earn a 10% return of $100K. You will pay $20K in capital gains taxes, leaving you with $80K (a net gain of 8%).
Tax law allows real estate investors to play by a different set of rules.
Depreciation
Depreciation is when the IRS allows you to deduct the cost of business items that have a “shelf life.” And guess what? That includes the building itself. This is one of the most powerful tax benefits of investing in real estate – you're allowed to write off an income-producing property based on wear and tear.
Cost Segregation
Multifamily investors get to take this a step further by itemizing each component of the building separately using a cost segregation analysis. That means each part of the apartment building, from the carpet to the landscaping to the roof, has its own depreciation schedule.
The bottom line is, you can depreciate up to 90% of the building’s value over 7 years, and that's a substantial tax benefit.
Wealth Building
As you receive income from your W-2 job and your syndication investment, you are building wealth, not only for yourself but for the future and your family.
Your children learn important lessons about their own wealth management.
You are building a legacy of financial freedom that can be passed on from one generation to another.
Inflation Hedging
The whole point of investing is to grow your wealth, but inflation decreased the worth of your stock portfolio.
Investing in multifamily is a great inflation hedge. When inflation goes up, so does the value of your rents, so does the value of your building.
As a multifamily investor, you actually benefit from inflation.
Early Retirement
If you're on a traditional path of working at a job and following the advice of a financial planner, you are most likely counting on a 401(k) and investments in the stock market to sustain you through retirement.
But the truth is, both are subject to market volatility and assume that the tax rate will remain the same for the foreseeable future.
Growing your wealth with multifamily is not only a better solution for funding your retirement, but could lead you to the possibility of early retirement.
That's what financial freedom is all about. When you're financially free, you get to make the decisions about how you spend your time.
Those are a few reasons why investing in multifamily real estate syndication is the BEST way to achieve your financial goals – even if you're working at your W-2 job.
