Sound Investing with Commercial
Multifamily Real Estate
Why Multifamily Real Estate?
Earn better returns and grow long-term wealth through commercial multifamily real estate investing.
Real Estate vs Traditional Investments
Since 2000, direct real estate investments have outperformed traditional investments. Investing at least 20% of your portfolio in alternatives like commercial real estate is known as the “20% rule.” Using the 20% rule helps earn greater returns and secure financial freedom.
Through the 20% rule, investors have earned about twice as much as investors who used a more traditional allocation.
Commercial multifamily real estate provides many long-term wealth building opportunities
Long Performance History
Multifamily apartments satisfy the basic need for shelter. As a result, they have a strong history and will continue to remain in demand.
Stable Asset Class
Unlike the stock and bond markets, commercial multifamily investments have few downturns with 300% fewer down years since the Great Depression.
Multiple Tax Advantages
There are 4 unique tax advantages available to multifamily investments that aren’t accessible to stock or bond investments.
The performance of a multifamily apartment is measured by its income and isn’t vulnerable to the same volatility seen with paper assets.
Have all the benefits of real estate ownership without the hassles of being a landlord through direct fractional investing.
Lower Risks Than Stocks
Multifamily investments have the best Sharpe ratio over the last 20 years and provide compelling risk-adjusted returns with regards to other asset classes.
No Legal or Debt Liability
You are protected from the legal and financial exposure that comes with active ownership through non-recourse lending, LLC structured investments, and insurance coverage.
Low Correlation to Stocks
Multifamily investments allow for improved stability and diversification that isn’t found in a traditional stock heavy portfolio.
The upcoming demographic wave brings in a strong future
Since the 1950s, U.S. economic cycles have lasted on average 5 and a half years according to the National Bureau of Economic Research (NBER). However, multifamily investments are controlled by much longer, 30 to 40 year-long, demographic cycles.
- The 20-34 age group is the single largest age group that rents
- There are over 67.5 million people aged 20-34 in U.S.
- Currently, 60-70% of those people rent
- This number is expected to grow over the next 30 years
How Our Process Works
Our process is built for wealth building through dependable returns and protection of principal.
1. Market Selection
We look throughout the United States for markets that have a strong history of stability and growth with projected long-term performance. Within these markets we target desirable neighborhoods that are good candidates for multifamily apartments.
During operations we focus our efforts on increasing and maintaining occupancy, optimizing gross income, and reducing overall expenses. Through these efforts our goal is to maintain or improve the property grade.
Through a rigorous multi-month due diligence process, we analyze each multifamily property for potential yield and equity growth. Only properties that meet high standards are considered for acquisition.
4. Liquidity and Distribution
Our market selection, acquisition, and operation processes all work to help improve the Net Operating Income (NOI) and annual cash flow of a property. As the NOI rises, the value of the asset increases as well as your investment.
To invest you must be an Accredited Investor that has gone through our approval process.
Accredited Investors are individual investors who either have a net worth of at least $1,000,000 (not including the value of one’s primary residence) or have earned income over each of the last two years of at least $200,000 and have the expectation to make the same amount in the current calendar year. You may also qualify by combining your income with your spouse and the new threshold for qualification would be $300,000.
Investing in commercial multifamily apartments is not suitable for every investor. Before investing, we’ll make sure it will be a good match for one another.
There are a variety of ways you can participate in this type of investing. Some of the ways you can invest are with cash, through trusts, using truly Self-Directed Ira’s, 1031 Exchanges, and more.
The benefits vary according to your own tax situation, but may include:
- Cash flows may be received without a current tax impact (tax depreciation deductions defer taxation, and depreciation rules are favorable to the investor)
- Distributions from refinancing events provide cash flows with no current tax obligation
- Section 1031 exchanges from other real estate investments into a multifamily housing can defer capital gains taxes and lever up your potential cash flows and returns
- When you sell your real estate investments, a significant portion of the gain may be taxed at favorable capital gains tax rates
- Real estate is an ideal estate planning vehicle. Your heirs’ future tax obligations are reduced due to the step up of basis to fair value at the date of death
- If you qualify as a real estate professional, paper tax losses can reduce current taxation on ordinary income
For more details on these potential benefits see The Tax Advantages of Residential Real Estate Investing. (Remember to consult with your own tax advisor before investing since the articles on this web site do not constitute tax planning advice.)
A K-1 is similar to a 1099 and is an accounting of the yearly tax income. An investor will receive a K-1 for each investment made. K-1 forms are often used in partnerships and real estate ownership.
$50,000 is the minimum investment in a fund.
No. Because real estate investments have a longer term time horizon, they are not as liquid as stocks and bonds.
We invest in stable markets with historical population, income, and job growth that are above average. When looking at employment, we target markets that have multiple industries that demonstrate a diverse economy. Additionally, we only invest in markets having agreeable landlord/tenant laws and a friendly business environment. Being long-term holders of commercial multifamily apartments, we look for the ability to grow within a market over a long period of time.
Each available investment opportunity meets the following criteria prior to being offered to investors:
- 5% to 7% average annual cashflow (distributed on a quarterly basis.)
- 12% to 15% annualized cumulative return from all sources. The return includes both the cash flow and equity growth. Equity growth includes the appreciation and principal pay down (realized at an equity harvesting event).
While our model is proven to perform well, these are not guaranteed returns. Investing in commercial multifamily apartments is not a good fit for everyone and we can help you determine if it is a good fit.
Investors can expect to receive quarterly distributions. Other distributions may be made to investors at the end of the year based upon the performance of the properties and when there is a sale or refinance.
Investors are provided access to updated information online through our investor portal. Each quarter, a detailed investor report for each investment will be emailed. The quarterly report includes information about the management, operations, and performance of the asset.
Yes. Once you decide to invest, Master Multifamily will help you through the process of verifying your accredited investor status as part of becoming an approved investor.
A Real Estate Investment Trust (REIT) is essentially real estate flavored stock. It is bought and sold like other stock and is tied to the performance of the stock market. Master Multifamily clients are direct fractional investors and are protected from that volatility.
Direct fractional ownership also provides investors access to tax advantages that aren’t available to REIT Investors.
Most importantly, Master Multifamily investors have the ability to choose which projects to invest in whereas REIT investors rarely have a choice in the projects the REIT decides to purchase.