Making money through your investments usually focuses on buying low and selling high. Some blue chip stocks offer dividend income in addition to the appreciation you receive upon sale of the stocks. However most investments require you to sell them before you receive any financial gain. Investing in multi-family real estate gives you the opportunity to earn income from multiple sources.
Multiple streams of income from multi-family real estate investments:
- Quarterly cash flow which is equal to your share of money in
- Equity build-up each and every month by your tenants paying down the mortgage principal
- Each year you receive a K1 with your share of income and depreciation. You only pay taxes on the amount equal to the income less the depreciation.
Financial gains you receive
- When the property is refinanced you can receive up to 100% of your principal back. This allows you to do two things: a) reinvest your principal investment in another investment, thus diversifying b) receive your quarterly cash flow even though you’ve already been paid your principal investment.
- Depending on the occupancy rate, the increases in rental rates, and the control and management of expenses, the value of a property upon sale can be significantly appreciated compared to the purchase price.
- The gain on sale has tax favored status of capital gains treatment, which is lower than the normal tax rate, or you can reinvest the appreciation tax free through a 1031 like-kind exchange.
Most, if not all, investments are purchase and sale transactions that are independent of each other. However, investing in real estate allows you to create a continuous series of investments that allow you to pass on to your heirs your real estate investments owned at death with a stepped-up basis. This means you can pass-on all accumulated appreciation to your heirs tax-free.
Consult with your tax attorney, tax accountant or CPA about the tax benefits of linking consecutive section 1031 like-kind exchanges.
To learn more about making money in multi-family real estate, visit the Investor Learning Center at www.apartmentvestors.comor contact Spencer Cullor 913-324-5900 or me, Craig Domann, at 719-310-6441. We would be happy to share with you more and answer your questions.
Photo courtesy of: Pepi Stojanovski at unsplash