In the current political landscape, the age-old tug of war between liberals and conservatives is as tense as ever. The urge to dismantle what is perceived to be a tool solely for the rich is truly misguided. In place for over 100 years, the Internal Revenue Code Section 1031, is a valuable tool to defer capital gains taxes on income real estate, and it benefits landowners directly, and many other people indirectly.
Many people start their real estate investing with multi-family properties, which makes perfect sense on many levels. An important consideration when buying is how your investment will be managed. Will you do it yourself to save money, or hire a professional to collect rents and field maintenance and complaint calls 24/7?
What separates residential property value from commercial is the economic performance. Residential has none, and commercial has nothing but. As investments, residential property is pretty lousy – no offense to readers who are homeowners – I am one too. But, look at your home purchase and its ROI (return on investment) after 10 years.
As the baby boomers gather into retirement, a significant portion doesn’t have savings to carry them through their elder years. Many will rely on investments that provide a safe but paltry income of 3-5%, or a risky but enticing income of 10-15%. The bottom line is: to get a decent return on your investment, you sacrifice safety. There is a very attractive alternative: the multi-family investment.
Real estate is the most powerful investment vehicle that exists. There are three huge benefits afforded to real estate investments that typically don’t occur in other investments: 1) Leverage, 2) Depreciation and, 3) Loan Interest Deduction. These accomplish very powerful results for income sheltering and equity appreciation. The compounding of these produces returns that dwarf stocks and bonds. Running a successful business would be the only way to beat it, but that is accompanied by greater risk and a lot of work.