There’s no mistaking the fact that we are living in volatile times. As an investor, you are likely weighing your options and deciding where you should put your money – the stock market or multifamily real estate.
Are Apartments A Good Investment Compared To The Stock Market?
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Let's see how things stack up.
Stock Market returns actually are low. Really low. For the last 20 years, the return was 9.5% percent, but that is before fees. It’s also before inflation.
By the time you're done, if you're using a 2% inflation rate, you're down to about 6.5%, and that's not counting the 10 we had last year.
That’s not good.
The stock market is volatile. It goes up, it goes down, and during the years when there are losses, the principle is reduced.
Real estate syndications have higher returns than the stock market.
This is simply the nature of the vehicle.
The downside to these higher returns, or course, is less liquidity. You can’t just pick up the phone and get your money out of a real estate syndication, the way you can with the stock market.
Better Performance During Recessions
Another place where multifamily real estate syndication performs much better is during recessions.
In previous recessions, we’ve seen the stock market lose 30-50%.
Real estate syndications have consistency.
In the last recession, the housing market took a hit, but not apartment buildings. During COVID, retail spaces didn’t do well, but multifamily (along with storage units and mobile home parks) thrived.
People always need a place to live. There is always a demand for affordable housing.
History proves, multifamily syndication performs well even during a recession (sometimes even better during a recession.)
Because there’s a shortage of affordable rental housing, the government gives tax advantages for this asset class.
With multifamily, you have substantial tax advantages that you don’t have with the stock market.
We see this with opportunity zones, as well. These are tax programs that provide incentives for investors with the goal of improving city blocks, etc.
Depreciation allows you to write-off the value of a real estate property over 27.5 years. The tax code is written differently for how the parts of the building can be depreciated and we build that in to all of our deals. As a result, 90% of the building becomes a phantom expense.
There's a cash flow in real estate syndications that you don't typically get in the stock market.
You have cash flow that you can use to quit your job and take control of your time.
Both active and passive investing generates cash flow that allows you to cover living expenses.
Because of the tax advantages, you’re putting money in your pocket and not paying taxes on it.
The stock market is not a great vehicle to reach financial freedom, especially in volatile times.
You can invest passively with an experienced operator who knows what they're doing and you can own a piece of real estate that cash flows.
That’s financial freedom, and that’s our goal.