Multifamily Real Estate

The Advantages of Passive Investing in Multifamily Real Estate

The smart way to reap all of the benefits of sound investing, without the headaches or time constraints.

If you’re looking to generate wealth through multifamily real estate investing without the headaches and time involved in researching, acquiring, financing, renovating, and managing your portfolio, look no further than passive investing with The GSH Group.

Our team of professionals – running the gamut from acquisition managers and contractors to property managers—achieves a return on your investment with expertise, dedication, and complete transparency. We do the heavy (and light) lifting; you enjoy just how well your investment performs with clear insight via our monthly and quarterly reports. What’s more, our team is always just a phone call away to answer any of your questions.

In a recent Forbes article, author Rod Khleif outlines the benefits of passive real estate investing: 

  1. Lower Barriers To Entry

The barriers to entry for passive investing are much lower than an active approach. An individual does not need to be a multifamily expert or have detailed knowledge of the tools and systems used to acquire and manage these assets. Instead, they simply need to have a relationship with a transaction sponsor who will bring them investment opportunities and the capital to invest. In certain types of transactions, they may also need to qualify as an “accredited investor,” which means they need to meet certain income and/or net worth requirements.

  1. Leverage

Multifamily investment firms are experts in the space, and individual investors who work with them get the benefit of their relationships, software tools, expertise, and time. These are extremely valuable assets in commercial real estate investing and can have a positive impact on investment returns.

  1. Better Properties

One of the major downsides to an active approach is that there is a limit on individual resources, which can also restrict the quality and scale of the investment properties that can be purchased. At the other end of the spectrum, multifamily investment firms have the ability to source capital from a large number of real estate investors. This means that they can afford to buy higher-quality apartment buildings that are in better locations and have more stable cash flow. For individual investors, it can be more advantageous to own a fractional share of a high-quality asset than a 100% share of a lower quality asset.

  1. Passive Income

As described above, a multifamily investment firm is responsible for the day-to-day management of the property in passive investment. For individual investors, this means that the manager does all of the hard work of property management and they are entitled to their share of whatever income is left over after all of the property’s operating expenses have been paid (including debt service).

In other words, a passive investment provides investors with the benefits of multifamily ownership without the hassle of actually managing the property. This provides them with passive income so they can use their time to pursue other interests.

  1. Tax Efficiency

Investments with a multifamily transaction sponsor are structured in a tax-efficient manner, which provides two important tax benefits for individual investors.

First, the apartment complex is purchased in a limited liability corporation, which is structured like a corporation and taxed like a partnership. All property income and expenses are run through the LLC, and anything left over is “distributed” to individual investors. This sort of structure reduces individual tax liability. 

Second, individual investors can defer capital gains taxes on a profitable investment by utilizing a specialized type of transaction known as a 1031 exchange. There is no time limit on these exchanges, and they can be repeated over and over, which allows for the tax-free growth of capital while deferring taxes indefinitely.

  1. Relative Stability

A multifamily real estate investment is often compared to other alternatives available such as those in the stock or bond market. Many passive investments are not publicly traded, which means that they also benefit from a degree of price stability not seen in publicly traded debt and equity markets.

Khleif, R. (2021, June 24). Council Post: Benefits Of Passive Multifamily Investment. Forbes. https://www.forbes.com/sites/forbesrealestatecouncil/2021/06/24/benefits-of-passive-multifamily-investment/?sh=f9c5178c7478.


Is Passive Investing with The GSH Group Right For You?

Read our “Investing With Purpose: A Deep Dive”  to learn more about our strategy and track record.

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