Why Should You Add Real Estate to Your Investment Portfolio?
When it comes to investing, most people go the traditional route. They do what their financial advisor tells them to and invest in stocks, bonds, and mutual funds. This is the “safe” route – or so you’re told. More and more people are buying crypto as their high-risk alternative as well, but one asset class that consistently delivers strong returns while providing stability and long-term value creation: multifamily real estate.
Here’s why you should seriously consider adding multifamily properties to your portfolio.
1. Resilience: Less Volatile Than Stocks and certainly way less volatile than Crypto
One thing that drives me nuts is that the stock market swings wildly based on economic data, interest rates, and investor emotions, and if someone sneezes too loud. Crypto? Even more volatile and really just a wild card. Multifamily real estate, on the other hand, remains much more stable. People always need a place to live, which keeps demand for apartments strong even during economic downturns. This demand keeps multifamily stable and cash flowing.
2. Strong Historical Performance
Commercial real estate, specifically multifamily real estate has outperformed the stock market long term. When looking at the Sharpe index, multifamily ranks as the highest return and 2nd lowest risk (US Bonds) investment. While some stocks can provide amazing returns over a short period of time, the resiliency of real estate has proven to beat stocks over the long run.
3. You Can Force Appreciation
When you buy a stock, you can’t do anything to improve the company’s performance. With real estate we are typically buying properties that have some low hanging fruit where we can:
Renovate units and boost rents
Optimize management to cut costs
Leverage market trends for increased appreciation
By increasing the net operating income, we not only increase the cash flow, but we increase the future value of the property. A simple increase of $50,000/year in net income will increase the value of the building by $800,000 or more.
4. Diversification Beyond Traditional Assets
Most investors are overexposed to stocks and bonds, leaving them vulnerable to market downturns. Financial advisors tell their clients to diversify yet put them into investments that are stocks and bonds. Multifamily real estate and other alternative investments provide a powerful diversification tool. Commercial real estate provides an income-generating, inflation-resistant investment that doesn’t move with the stock market. This diversification helps balance risk across an investment portfolio.
5. Major Tax Advantages
One of the biggest benefits of investing in multifamily real estate is the tax efficiency. Investors can take advantage of:
Depreciation: Reduce taxable income by writing off property value over time
1031 Exchanges: Defer capital gains taxes by reinvesting in another property
Pass-Through Deductions: Benefit from real estate-specific tax breaks
These tax advantages allow investors to keep more of their returns, making real estate an even more attractive investment.
So how can you invest in a multifamily investment without a pile of cash?
A recent transaction of ours at Endurus Capital was a $24mm purchase with a $9mm down payment. How did we buy it? By pooling investors’ money together via a syndication. We had 87 individual investors invest between $50,000 and $600,000. They all are fractional owners of a beautiful 113-unit apartment complex that is paying them monthly cash flow distributions. You don’t need millions to buy an apartment complex. Through passive real estate syndications, investors can participate in large-scale multifamily deals with as little as $50,000. The beauty is that you don’t need to work on the day to day. No tenants, toilets, termites, and trash to deal with.