Multifamily Investing in a Volatile Market

Ok, so like many of you, I am watching the stock market with a bit of unease. After the crash, then the boom, of 2020, we saw a huge influx of investors into the market, propelled by the likes of 'gamefied' apps such as Robinhood and Webull, stimulus checks to fund our desires to get rich quick, and a desire stick it to the institutions, with crazy 'casino-like' investments into stocks like GME and AMC.

But, what new & optimistic investors forget is that markets don't always go up, and that speculative investments are, by definition, inherently more risky than what many investors consider to be boring. Yet I have also witnessed investors putting all of their savings into a few 'hot' stocks, SPACs, penny stocks, often using margin accounts to increase their positions, only to get burned, and badly.

I'm not saying that for some, there can't be a place for speculative plays in your portfolio. And the more disciplined and educated you are, you might see a significant uplift in your savings pot. Yet greed tends to rear its ugly head, and in their euphoria, people forget to take profits. They also forget something that has been demonstrated time and time again by decades of market data - diversification.

​Why diversify?

​

Markets rise and fall, and almost none of us, not the best technical traders, no matter how much we pore over charts, or look for undervalued stocks, can outperform the market, consistently, over time. This is why portfolios constructed of passive stock and bond ETFs consistently outperform the market, once you add long time horizons.

Moreover, we have little control, nor predictive ability, over when the next crash or correction might happen, when interest rates might rise, when we might enter a period of inflation, and the best defense against the unknowns is to have a diversified portfolio, across a multitude of assets, so that your nest egg can weather any storm. I am a firm believer that real estate should hold a significant part in our overall portfolio. ​

'90% of all millionaires became so through owning

real estate'

- Andrew Carnegie

A Better Alternative

As we near retirement, we are shifting more and more of our portfolio into multifamily syndications. And here's why-

1. Safety - the operators we work with have a proven track record, and are operating in some of the best markets in the US, which offer job diversification, population growth, good schools, low crime, and high rental demand. Plus, as most projects have over 250 units, we are not worried about vacancy issues, which have remained stable throughout Covid.

2. Income - we know that our distributions will be predictable, and much more tax efficient than investing in REITs or dividend-yielding stocks and shares.

3. Returns - Class A shares (which are focused on income, and don't participate in the equity split) return 9-10% per year, and Class B shares return an average annualized return of 18-22%.

4. Tax advantages - investing in multifamily syndications provide the same write off as if we were buying rental properties

5. Appreciation - we are able to participate in the sale of our properties, like investing in a slow flip, which we can then allocate to our next real estate investments.

6. Inflation protected - when interest rates rise, so do rental values & appreciation, which means instead of chasing yields in the bond & dividend income plays, we know that our income and overall returns will keep pace with the market. Plus, the returns are much better than other 'safe' plays like TIPS.

7. Tangible asset - People will always need a roof over their heads. And as we select properties in the best sectors, 'B class' complexes, we are further shielded from defaults, evictions, damages, and overall vacancies, as this is the 'sweet spot' for ongoing reliable income streams, and adds further protection from market downturns, being one of the most sought after types of commercial properties.

8. PASSIVE - I cannot stress enough how much of a benefit this is! Life is short. Spending time always chasing your money - either through buying/managing/renting/repairing/flipping properties, or through watching your investments in the stock market - can be very stressful, and can detract from pursuing things your really love to do. I, and the thousands of other investors who are investing this way, love being able to sleep at night, knowing that their money is doing their work for them.

If you are an accredited investor, I invite you to schedule a call with me, so I can share some of our current offerings, as well as explain the ins and outs of multifamily investing, and how it can help you and your family start to build wealth today.