It has been said that 90% of millionaires grew their wealth from real estate investments – and seasoned investors agree. Multi-family properties, popularly known as apartments, have all the potential to be a lucrative business and source of steady income.
This is especially true in the current real estate scene where low inventory and higher home prices are pushing people to rent instead of buy. With the forecast that the apartment market will remain strong this year, investing in apartments presents a good opportunity to diversify your portfolio.
We break down the reasons why an apartment makes a sound investment.
Dependable income source
One of the biggest benefits of investing in apartments is getting a dependable income source. It is recurring income that yields a higher net value over time. The average lease for an apartment is 12 months, so you’re assured of a constant source of cash. On lean months where the vacancy rate is higher, you can tap into short term leases for leisure and business travelers.
With a steady cash flow, you can enjoy financial security for retirement, while you pay off your mortgage or acquire additional investments.
Owning an apartment comes with great tax advantages, with US tax laws rewarding rental property owners. You can deduct certain business-related expenses from your taxable income, such as mortgage interest payments, depreciation, insurance, travel for work, pass-through tax deductions, and repairs. Consult a tax professional on how you can maximize this benefit.
Better control over your investment
The success of investments like stocks or bonds largely depends on market factors beyond your control. Dedicated monitoring is often needed, and this could mean hiring a professional to do it for you.
In apartment investing, you gain better control over how to manage your asset. You can choose the type of property to buy, how much rent to charge (while staying within legal bounds), the features you want to include in the property, and the tenants to accept. You also get to decide how to maintain and manage the apartment.
Rental properties such as apartment complexes tend to appreciate in value. With good management and rising rental rates, you can expect your property’s income to improve and its value to increase. You get passive income from rental payments, and if you decide to sell the property down the road, you gain a profit from the value appreciation.
Owning an apartment to diversify your portfolio provides you with protection from a dramatic loss if the market shifts. Moreover, the demand for multi-family properties is often strong in most parts of the country so there’s plenty of opportunities to acquire more assets in various locations.
Off the plan purchase
Apartments present a better opportunity to purchase off the plan. You can buy the property at pre-construction stage, making it more affordable. There’s no urgent need to pay a mortgage until the settlement is due. With a longer settlement time, you might see your apartment grow in value.
Make the right move in apartment investing
Apartment investing entails numerous factors to consider. One of the first steps to success is to have a real estate expert by your side to guide you in making important decisions.
If you’re thinking of investing in apartments, connect with us, the Noel & Martinez Team. We are professional and dedicated real estate agents who have the expertise to guide you in choosing the right investment property in Fort Collins, CO and the surrounding communities.
Contact us today by leaving a note here!