Passive investors often debate about whether real estate or the stock market is the best place to grow their money. While there is no easy answer to this question, one thing is for sure. The multi-family property investment market is on fire. And investors should choose a good investment in this market over the stock market for the following reasons.
Average stock yields are around four percent a year. This is favorable to a savings account but nothing special. Of course, you can make long-term money with stock by selling it if the price increases but short-term yields will be modest at best.
Multi-Family property investments yield profits immediately. This profit comes from the rent paid by families taking up residence at the property. This immediate return is a significant advantage to investors when compared to the return on stock dividends. Also, the property may appreciate and provide more profit over the years.
Interest rates on loans to purchase multi-family property are now near all-time lows. Also, you have the option of refinancing the property when it is beneficial to you to pull out the equity you have accumulated. This option is simply not available with stock investments.
Another advantage multi-family property investment holds over stock market investment is lower capital gains taxes. This is accomplished by using the depreciating value of the property and capital expenditures to lower the income generated by the property. This tax benefit can add up to huge profits for investors.
Potential Added Value
Minor repairs and upgrades can be made to multi-family properties to increase the value of the properties. This will not be possible with every property but it should be a major influence to purchase when this benefit is available. The added value to the property can justify rent increases and will likely cause more appreciation to the value of the property over time.
A final major advantage to multi-family real estate investments is less money is needed to make a significant investment. Additionally, a house losing value temporarily is only a problem if the investor tries to sell the house. The savvy investor knows he can hold the property and collect rent until the value of the property increases.
The debate between the merits of real estate and the stock market will no doubt rage on among investors. However, the five advantages above make multi-family real estate investments a good option over the stock mark