The 2016 US Physicians’ Financial Preparedness report by the American Medical Association shows that nearly 40 percent of practicing physicians are behind on retirement. Investing passively in multifamily apartment real estate can provide a great avenue to retire or be financially independent.
Investing in the multifamily asset class can be better than investing in hotels, medical offices, warehouses, stocks, self-storage or land for several reasons:
- Multifamily investments are significantly resilient to economic fluctuations as everybody needs a place to stay.
- Multifamily values are based on net operating income (NOI). A skilled operator of multifamily housing can force appreciate the value by executing a well-planned business plan to increase NOI. You can buy a multifamily property that is not performing 10 percent below its potential and execute a business plan to increase NOI by 15 percent to increase your investment return equity by 50–80 percent.
- Since the 2008 housing burst, the new thought that renting is easier than owning a home pushed up rental demand to a higher level previously not seen in the nation’s history.
- You can invest using your IRA after moving it to self-directed IRA or checkbook IRA. The process is easy and we have many investors who do this. Contact us if you are interested in learning more about this topic.
Physicians usually fall into a high personal income tax bracket. There are there many tax benefits available when investing in multifamily housing. These benefits can be realized through a personal income tax reduction with depreciation paper loss.
- Depreciations can be shown as a paper loss and flow through your personal income tax as a deduction.
- The multifamily asset class is the only asset class to get higher depreciation per year as it’s depreciated over 27.5 years. All other asset classes such as office, warehouse, industrial, self-storage, etc., are depreciated over 39 years.
- The 2017 Tax Cuts and Jobs Act tax reform law introduced “Bonus Depreciation” for multifamily housing investments that allows much higher depreciation in year one for assets acquired after September 2017.
* For more information on how Multifamily real estate can help your tax situation we recomend that you speak with your CPA or tax professional.
So if you are a practicing physician, or any other professional who is behind in saving for retirement remember, you can get all the multifamily real estate benefits by being a passive investor using a syndication. In multifamily syndication, the person putting together the deal is called a sponsor, and investors investing passively are called passive investors (or limited partners, LP’s). The benefits are:
- Your investment is passive! You can use the sponsor’s time and skills to invest passively and still have the potential to reap all the benefits outlined above.
- Since you are passive investors, there is minimal liability to you. No investment is ever guaranteed, but when you work with experienced operators like AZ Wealth Builders you reduce your risk liability.
- AZ Wealth primarily purchases nonrecourse, long-term loans. That means if the investment goes south due to some issues, the lender can’t come after the investor’s personal assets. Bad boy carve outs apply.
If you are interested in learning more about how to get involved as a passive investor please contact us by filling out our form online, or email Marjeanne at