Investment Properties vs. Stocks

Why Commercial Real Estate May Outperform Stocks in Risk Management, Cash Flow, and Long-Term Growth

There are many reasons you should consider alternative investments like real estate, our asset class of choice is multifamily apartment buildings, here are a few things we love about it compared to the stock market that you may find interesting

Stability and Predictable Cash Flow

One of the primary advantages of commercial multifamily real estate is its potential for stable and predictable cash flow. Unlike the stock market, where dividends can fluctuate based on company performance and market conditions, rental income from multifamily properties tends to be more consistent. Residential rental demand often remains steady, providing investors with a reliable stream of income even during economic downturns.

Diversification and Reduced Volatility

Commercial multifamily real estate offers investors an opportunity to diversify their portfolios beyond traditional stocks and bonds. Diversification is a key strategy for risk management, and real estate investments can act as a hedge against stock market volatility. Real estate values are not directly correlated with stock market movements, providing a level of stability that can help preserve wealth during market downturns.

Tangible Asset and Inflation Hedge

Real estate is a tangible asset, providing investors with a physical presence and a sense of security. Unlike stocks, which represent ownership in a company, owning a multifamily property means holding a tangible piece of real estate. Additionally, real estate has historically served as an effective hedge against inflation. As the cost of living increases, so does the value of real estate, leading to potential appreciation and protection of purchasing power.

Tax Advantages and Depreciation

Investing in commercial multifamily real estate offers significant tax advantages that are not readily available in the stock market. The U.S. tax code allows real estate investors to benefit from depreciation deductions, reducing taxable income and increasing cash flow. Moreover, investors can take advantage of 1031 exchanges to defer capital gains taxes by reinvesting proceeds from a property sale into another qualifying property.

On top of all of this, the average stock market return is around 7%, whereas on the deals we do, we aim to at least double that to 14-15% IRR minimum. this does not include any of the tax advantages. when you take part in a syndication you are also dealing directly with a member of the team that is actually doing the deal, a part of the management team. in a stock market investment, how many people are taking a piece of the pie before you get yours? stock investments have their place if diversity is part of your risk management plan, but there are much better opportunities available.

One thing some will say is a "con" of real estate syndications, is that as an LP, your capital is at the "top" of the capital stack, potentially putting it at risk to some extent, if say for example, the bank has to foreclose because the GP wasn't making loan payments and the value at foreclosure wasn't enough to cover the equity of the LP's, and to this I would say, make sure you do business with people you know, like, and trust. If you can find a syndicator that you can trust, the returns are far better. We want to be that team that earns your trust, don't hesitate to book a call with any questions!