“To Educate and Help People Realize The Possible Financial Gain Through Passive Apartment Investing.”
– Enlightened Ventures Mission Statement
Is Investing In Multifamily Real Estate FOR ME?
YES, we do what’s called syndication, meaning we would pool your money together with other investors like you, to make a purchase larger than most individuals could afford on their own. In our case it would be the down payment to a multifamily apartment asset, with potential value add opportunities.
Value Add Apartments makes you the investor *PASSIVE* money in 2 ways;
First, as we hold the asset and make upgrades to interior/exterior of property, implement efficient management, bringing rents to current market value, implement a RUBS program, and increase revenue in various other ways, we also collect rent during this! What this means to you is we are able to pay you distributions. ***These distributions are possible to be 100% tax free income due to tax reducing strategies such as depreciation/cost segregation.
Second, because commercial property is valued based on its INCOME, by increasing income through various avenues like the ones stated above, the property is in turn worth more. What that means to you is you get to share in the profits at sale or refinance!
To Invest with us, it’s important that we get to know you better! Please Book a CALL with us so we can learn more about you and your investment goals!
Questions? Contact Us
Why Invest In Multifamily Real Estate?
Cash Flow
Cash flow from Multifamily Real Estate assets is one of the main attractions of this investment class. Even a modest rent increase across a large number of units can make a huge difference in cash flow distributions. This can be also be referred to as an 'equity dividend' which is a normal cash distribution to all investors. Many who have invested in Real Estate at scale have replaced their 9-5 jobs with passive cash flow from similar assets. As described below, these distributions have potential to be tax free income.
High Rate of Return
Annualized returns (IRR) of 13+% or more are typical in the industry, and we do not target properties without the potential for at least double digit returns with conservative assumptions. A large part of these returns are driven by 'forced appreciation' where strategic physical or operational renovations are made to increase rents/profits, resulting in an asset worth much more than what we bought it for. Compared to the stock market which achieves a historical 7% on average(which you still pay taxes on), Multifamily has strong history of outperforming the stock market.
Tax Benefits*
There are many different LEGAL tax benefits that come with apartment investing. Just for quick few examples, almost all expenses of operating the property can be written off, the interest paid on the loan, as well as the building depreciation. Through depreciation, it allows us to write off the value of the asset overtime. We can combine this with other strategies such as cost segregation to accelerate these write offs to much shorter time frames. These write off's allow the income paid to you during the hold period to be virtually or actually tax free!
There is also what is known as a 1031 exchange in Real estate, which allows you to “trade” like property, without having to pay capital gains tax. This can benefit you MOUNTAINS when you get into a deal, or on the backend exit of the deal, or both! 1031 allows you to forego paying capital gains if you trade your current property for a new investment property of equal or greater value!
*We are NOT tax consultants! We recommend chatting with your CPA or tax professional for more specific tax rules and how they pertain to you.
Leverage
When buying an apartment complex, there is opportunity to leverage your money massively! With loans today around 75% LTV(loan to value), in layman's terms, that means if an asset is being sold at 1 million, the bank would loan 750k(75%), and we would need to pay the remaining 250k at time of purchase. This means we effectively QUADRUPLE our buying power, and receive 1 million dollars worth of asset for 250k. Compare this to margin accounts for stocks where you can only leverage 50% of the value of a securities purchase. Meaning that same 250k only gets you 375k worth of stock!
Risk Evaluation-Tangible Asset
Every investment has it's risks, although as real estate investors, we like to think we can mitigate as much risk as possible! Compared to stocks, real estate has the advantage of being a physical tangible asset. Stocks are a piece of paper saying you have part ownership of a company, index fund, bond or something along those lines. There is nothing stopping these stocks from going to absolute zero, if the company fails, your stock is worthless. However, with Real estate, if doomsday were to hit, you still have the building and the land it sits on to fall back on.
Risk Hedging with Economy of Scale
One of the other ways Multifamily Real Estate can eliminate possible risk is by investing in LARGE apartments. When most people invest in real estate they take their money and buy a 2-4 unit property where they are 100% owner! When you invest with us we can take that same $ you would have used, combine it with other investors, and instead we purchase an apartment complex that has 50 or 75 or 100+ units.
The advantage to this is if we bought a 75 unit, we would have 75 different streams of income coming in that pay our expenses, renovations, and your distributions! 2-4 unit properties have some of the highest rates of foreclosure in America. The big reason for that is if 1 person moves out of a quadplex you're losing 25% of your cashflow, and possibly then bleeding money instead of making money. Whereas if 10 people moved out of the same 75 unit complex, you're still receiving -87% of your cash flow! Also, the potential downside is further mitigated by having other investors involved, so you are not the sole owner.
On the upside, with the same 75 units, a 25$ increase in rent per unit results in an increase of $22,500 extra revenue per year! Not to mention on the sale this will further increase the property value, because NOI, or profit helps determine the properties value!