How Can You Win in 2023?

In our last post, we established that, despite the impending headwinds of interest rate hikes and the inevitable recession it will induce this coming year, residential multifamily real estate is positioned to continue to be a standout asset class for the following reasons:

• While unemployment will increase, it will remain low by historical standards with continued consumer spending, and strong individual savings.
• There will be a slowdown in sales and development of single-family and multifamily properties.
• This slowdown will continue to increase the demand for residential rental units.
• There is a shortfall of 600,000 apartment units in the U.S., and over 4 million units need to be built by 2035 to meet demand.  This is anticipated to take over 10 years in order to catch up.

We firmly believe that continuing to invest passively in multifamily real estate in 2023 is a wonderful strategy to accelerate your wealth and generate passive income for the following reasons:

• Cash flow – You are investing in an asset that generates cash flow between 5-10% annually that is tax-free.  By comparison, the S&P 500 paid a dividend this year of 1.73% which is taxable.
• Monthly or quarterly distributions – ‘Mailbox Money’ comes into your bank account on a monthly or quarterly basis without any active participation (i.e.:  work on your part), thereby giving you income while you sleep.
• Tax advantages – While you as a high-income earner have to pay 25-35%+ of your income to the government, you keep all of the income you earn passively in real estate.
• Forced appreciation – An effective management team can predictably increase the values of the assets.
• Back-end payment – Modest increases in the value of the assets result in excellent returns for you as an investor.  For instance, a 15% increase in the value of the property can result in anywhere between a 30-75% return of your investment, in addition to the passive cash flow.
• Outsized risk-adjusted returns – While a traditional stock/bond portfolio can give you an average return of 8% annually with yearly fluctuations (such as the 20% drop of the S&P 500 in 2022), a passive real estate investment can give you 15-25% annual returns without the roller coaster ride of the public market.  This doubles your rate of wealth building.

Look for opportunities to invest in assets in healthy markets that cash-flow immediately or in the foreseeable future, have opportunities to appreciate (either organically or forced), and are operated by trustworthy and reliable teams.
Doing so will build up that portfolio that will generate that income to free up your time, build that wealth to do the things you desire, and live the life that you envisioned.

Doing so will build up that portfolio that will generate that income to free up your time, build that wealth to do the things you desire, and live the life that you envisioned.

If you want to talk about how you can build and preserve wealth and generate passive income like the ultra-rich, set up a time to talk with me