When it comes to investing, people often talk about turning to the stock market to earn residual income or planning their retirement. While the stock market is a common approach to investing, real estate is still one of the best ways for new investors to get started.
Real estate provides steady income, long-term financial security, tax benefits and stability with a tangible asset. You also build equity and help to mitigate risk with a diverse real estate portfolio against higher risk investments like stocks. Plus, it’s a great way to hedge against inflation. As prices goes up, so does the rental income you get from your property and its value.
Why invest in multi-family real estate?
Multi-family residential property delivers a recurring stream of cash, especially in high-occupancy buildings. Multi-family real estate generally describes apartment complexes, but is also used for duplexes, triplexes, townhouses and other dwellings that house families in separate units.
Even with a single vacancy, the impact on your bottom line is minimal compared to single-family housing. It is more profitable to invest in income-generating properties like apartments than single-family homes.
Tenants help pay down the mortgage on the property and mitigate vacancy risks with the bottom line. Multi-family rental properties also share many of the same amenities and makes maintenance easier since it’s under one roof. Plus, with the right property management company, investors have a trained team to handle paperwork, collect rent, execute leases and market the property to secure full occupancy.
Working with a real estate investment group is a hassle-free way to own rental property without being a landlord. It’s a hands-off approach for those who don’t want the headache of having to manage a property but still reap the benefits of income and appreciation.
How does it work?
It may sound daunting to own multi-family real estate, but the reality is that it’s a great way to earn passive income. When you invest in a real estate investment group, the company builds or buys a group of properties, such as apartment blocks and condos, and then sells them to you, an investor, as rental properties. As an investor, you can own one or multiple units, but the company operating the investment group manages the units. In exchange for handling the maintenance and other property management responsibilities, they receive a small portion of the monthly rent proceeds.
You save yourself a headache and take a hands-off approach while someone else handles the day-to-day activities of the property.
Are there special requirements?
Companies that offer its own securities must register these investments with the Securities Exchange Commission (SEC) before they are able to sell them. But, there are a few exceptions, including selling unregistered investments to accredited investors.
To become an accredited investor, you must have $1 million in net worth (not including your home) individually or combined with your spouse, or make $200,000 as an individual or $300,000 as a couple during the last two calendar years. Individuals must also demonstrate they will be able to maintain these income thresholds during the current year.
Once you are an accredited investor, you are allowed to make investments that non-accredited investors cannot make, such as: private equity deals, hedge funds, venture capital funds, angel investing and equity crowdfunding. Essentially, the SEC wants to ensure investors understand the risks involved with these investments since they are different than stocks, bonds and mutual funds.
Fortunately, there’s no training or testing involved to become an accredited investor. But, it does open doors to the types of investments you can make and an advanced reward profile.
In summary, investing in multi-family real estate is an easy and quick way to buy high-quality properties with an excellent return on investment. There is no daily management on your part and you’re able to insulate against downturns in volatile markets. Plus, you don’t have to do it alone. Working with the right firm like Pantheon Invest will ensure you invest in the right projects with low risk and attractive returns.