Monthly cashflow
Apartment communities provide stable monthly cashflow. With multiple apartments under one roof, expenses are decreased and you hedge against vacancies. A vacancy in a single family or duplex can wipe out revenue for the year.
Amazing tax benefits
The newest tax laws favor real estate investors looking to lower their taxable income. This occurs through depreciation and bonus depreciation. Generally, the depreciation will exceed the investor’s annual distributions, so they won’t have to pay taxes until they receive their proceeds at sale. Yet even then, capital gains on sales proceeds can be deferred (and re-invested) via a 1031 exchange.
Control
Commercial real estate is valued based on the specific asset’s net operating income rather than what the market dictates such as with single family residences. That means that you can force appreciation of an apartment community by decreasing expenses and increasing income.
Demand
Renting is an enduring need. More so today than perhaps ever before. Renters recently surpassed homeowners in 22 major cities in the United States. The driving forces here are baby boomers and millennials. Baby boomers are downsizing from houses to more manageable apartments. For millenials, high barriers to homeownership and increasing student debt make it challenging to buy homes. Yet even without these obstacles, millennials are choosing to rent because they value flexibility and peace of mind.
