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Investor looking to collaborate
Hi everyone. I am new to the group.
By profession, I am a technology strategist. However, I very passionate about real estate investing. My current interest is in multifamily properties and ground up construction.
Once the valuations and cap rates readjust to a sane level, then I would like to start buying again. What I mean by “sane” is why would I risk capital in a real estate transaction when I can earn almost risk-free returns of 5.5% in US Treasury Bills?
While I “wait” for this adjustment, I would like to network and collaborate with likeminded investors that are searching for financially sound deals.
Don’t get me wrong, I would love to do a deal before the end of 2024…it just needs to be risk-adjusted for potential changes in the economy.
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3 Replies
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Hey Tony, I would have to respectfully disagree and here’s why:
I understand the appeal of a 5.5% return on treasury bonds, which provides a stable income stream. However, investing in multifamily real estate offers a broader spectrum of returns that may align better with your overall investment strategy:
- Cash Flow and Yield: While treasury bonds offer a fixed interest rate, multifamily properties can generate not only consistent cash flow but also higher yields over time through rent increases and property improvements.
- Appreciation Potential: Multifamily real estate historically appreciates in value, offering significant upside potential beyond the initial investment. This appreciation can compound your returns and build substantial equity over the long term.
- Tax Benefits: Real estate investments provide unique tax advantages, including deductions for depreciation, mortgage interest, and property expenses. These tax benefits can lower your overall tax liability and enhance your after-tax returns, which treasury bonds do not offer.
- Inflation Hedge: Real estate tends to be a natural hedge against inflation, as rents and property values often increase during inflationary periods. This can help protect your investment’s purchasing power compared to fixed-income assets like treasury bonds.
- Portfolio Diversification: Adding multifamily real estate diversifies your investment portfolio beyond traditional bonds, spreading risk and potentially improving overall portfolio performance.
Example Perspective: Consider a multifamily property purchased for $1 million with a 25% down payment ($250,000). If the property generates an annual NOI of $80,000 and appreciates at a modest rate, your overall return could surpass that of treasury bonds significantly. Factor in tax deductions and the compounding effect of reinvested cash flows, and the multifamily investment often proves superior in terms of total returns and wealth accumulation.
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Bryan, you make some excellent points!
For me to be excited, I would like to see sellers discount their prices to give investors a fairer return on their investment. At a minimum, the cap rate should be equal to or greater than the long-term price of debt.
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Agree to it is not a better timing like know, that interest rate are dropping and developing is happening. We can talk more about it on networking with Bryan on Friday.
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