“The secret of getting ahead is getting started.” — Mark Twain
Are you a new investor considering real estate?
Are you wondering whether you should buy houses or passively invest in multi-family deals?
Or maybe you are already invested in some single-family rental homes, and you have wondered if you should get into multi-family investing?
These are great questions to ask!
Most people think that the way that they are going to become financially free is through single-family real estate.
I thought this way! Back in the day, I had four single-family homes.
The idea was to retire with the “passive income,” of owning a portfolio of homes.
But then I realized… owning homes is a lot of work!
I had this grand plan of getting 30 single-family homes to live off of. But then my cousin told me about the truly passive nature of multi-family syndication.
And then he did it one better. He told me that you can get great returns for as little as a $50K investment.
Let me tell you…
I’ve never turned back!
Problems with Single-Family Rentals
The amount of work
The first and biggest issue with single-family rentals is that they are way too much work.
Even simpler turnkey properties!
You will often have calls every day or week, problems with tenants, and other random issues with the property that spring up.
If you don’t have a property manager, it will be even more time. Fixing issues with the property, hiring contractors, dealing with tenants, etc.
All of these things take up your time. And wasn’t the whole point of getting into real estate to free up your time?
It is not scalable
All of this adds up to the fact that single-family rentals are not scalable.
You can’t endlessly find more properties to add to your portfolio. Every new property that you add takes away a good chunk of your time.
Even with a property manager, there is a limit to the time you can put in.
And if you are a highly paid professional, this is a waste of your valuable time.
Doesn’t generate enough income
On top of the time aspects, single-family rentals don’t generate the kind of cash flow that you would want for passive investing.
Often you just break even or only have a profit of around $300-500 a month.
But don’t forget all the work you are having to put in to get that money!
I have a friend who owns a single-family rental and has it completely paid off. He’s making about 4-5% on his initial cash investment.
Now, you’d think in comparison to the stock market that 4-5% is great.
But it’s not! Compared to the 10-20% that is typical of a multi-family deal, that’s terrible!
Even a bad average annual return for a multi-family deal is 8-12%.
Pros of Multi-family Investing
After you are invested in a multi-family deal, there isn’t much that you need to do.
You don’t need to take calls from the tenants or property manager. You don’t need to worry about the day-to-day work that needs to be done on the property.
You can sit back, enjoy mai tais on the beach, and let the cash come in.
I know someone that is invested passively in over 70 deals!
Because the time commitment is so low, you can scale your investments as high as you wish.
Typically, you can expect consistent, double-digit returns from multi-family deals.
That is amazing!
Some single-family rentals can have similar returns to a multi-family deal, but you have to factor in all the time you have to put into it.
Your time is extremely valuable!
If you are getting similar or lesser returns from your single-family investment, you have to factor in how much money your time is worth. Do the math, and I promise it is not worth it.
Big Tax Advantages
This is one of my favorite benefits of multi-family syndications!
The income that is generated from your multi-family investment has amazing tax advantages.
Multi-family deals allow you to deduct or defer the income to a later date. This is amazing!
Doing this saves you even more money in the long run!
Lower Risk than Single-Family Rentals
Something that people don’t realize is that multi-family deals are a much safer investment.
Let’s flashback to the worst part of the recession in 2009.
The default rate for single-family homes was 4%, whereas in the multifamily it was .4%.
That makes a huge difference in the ROI and the overall security of the investment!
Looking at this, you can see why I encourage everyone to explore investing in multi-family deals.
People often think single-family rentals will make them financially free, but it’s through multi-family deals that financial freedom is actually possible.
Multi-family syndication allows you to take a step back after you invest, and let the money come to you.
The hardest part is getting started.
But lucky for you, I am here to help!
Check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future.
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