It’s no secret that investing is one of the best ways to build wealth. Whether you’re planning for retirement, saving for a big purchase or simply looking to grow your wealth for the future, putting your money to work can be an excellent way to achieve your financial goals.
However, one of the big mistakes that people make when investing is putting all of their eggs in one basket, meaning they only make one type of investment.
For your investments to produce the biggest reward, you want to make sure they are diversified!
A common diversified investment portfolio typically includes a mixture of real estate, bonds, stocks, fixed income, etc.
In this blog post, you’ll learn why diversifying your investments is crucial and how it can help you achieve your financial goals!
First things first, let’s clarify what diversification really means.
Put simply, diversification is a strategy that involves spreading out your investments across a variety of asset classes, industries and geographic regions.
The main goal with diversification is to reduce risk by allocating your funds to a mix of assets, instead of concentrating all of them in a single stock, sector or region.
Ultimately, having a diversified portfolio will benefit you greatly in the instance of one investment underperforming, because the overall impact on your portfolio will be minimized.
As mentioned, one of the primary reasons to diversify your investments is risk management.
All investments carry some level of risk, whether it’s market risk, industry-specific risk or company-specific risk, but you can reduce the impact of these risks on your overall investment performance by diversifying your portfolio.
For example, let’s say you are heavily invested in a single technology company, such as Apple, and that company suddenly faces financial difficulties or a sudden decline in its stock price. In this instance, your entire portfolio could suffer significant losses.
On the flipside, if you spread your investments across different sectors, including technology, healthcare and real estate, a setback in one sector would have a less detrimental effect on your overall portfolio.
Next, you want to consider market volatility, which refers to how the prices of financial assets, such as stocks, bonds, commodities or currencies, fluctuate within a specific period of time.
Fluctuations occur based on economic, political or global events, such as the COVID-19 pandemic, for example, where all travel industries were majorly impacted.
When you have a diversified portfolio, you’re able to more successfully weather these market storms and reduce the amount of loss on your assets, because when one asset class experiences a downturn, another may be performing well.
This balance can help stabilize your portfolio’s overall returns and reduce the emotional stress that often comes with investing.
Although risk management is a huge reason we push for diversification, it’s not the only reason. Diversification is also a strategy for long-term growth!
Different asset classes have varying risk-return profiles, so you want to consider each of these when choosing where to invest your funds.
For example, stocks tend to offer higher potential returns over the long run, but they also come with greater volatility. Bonds, on the other hand, tend to be more stable, but offer lower returns.
By combining these asset classes and potentially including alternative investments like real estate, you can create a diversified portfolio that allows for steady growth for the long term, while also managing risk.
Overall, diversification encourages a more disciplined approach to investing. When you have a well-structured and diversified portfolio, you’re less likely to react emotionally to short-term market fluctuations and can instead stay focused on your long-term investment strategy and financial goals.
Historically, diversified portfolios have shown a tendency to provide more consistent returns over time compared to portfolios concentrated in a single asset class. This consistency is essential for investors looking to build wealth steadily and achieve their financial goals!
Always remember: successful investing is not about timing the market or picking individual stocks perfectly – it’s about creating a well-balanced and diversified portfolio that aligns with YOUR financial goals.
So, whether you’re a seasoned investor or you’re just starting your investment journey, remember the power of diversification and make it a cornerstone of your investment strategy.
It’s a tried and true approach that can help you achieve financial security and peace of mind in an ever-changing financial world.
At XSITE Capital, we believe that investing in multifamily real estate is one of the best ways to diversify your investment portfolio and earn passive income.
When you partner with experienced syndicators like us, you can trust that the market research is carefully considered and that your money is going toward investments that will produce positive returns.
If you’re unsure of how to get started with multifamily real estate investing, click here to view our process!
The XSITE Investors Community is for investors where you can receive:
Today, XSITE Capital currently has over $168 million portfolio value, has helped empower and grow over 1,000 minds and proudly has over 800 doors under management.
We welcome new investors into our community each week and would love to have you.
When you first learn about multi-family real estate syndications and the beauty of passive income, you might start to wonder if there’s a catch.
Making money without having to do any of the intense work yourself might sound a bit too good to be true and like any smart investor, we understand that you might have questions.
We would never expect you to blindly jump into multi-family real estate without first fully understanding the process and knowing the pros and cons of this type of investing.
To make sure you fully understand how this works and are aware of the potential risks versus rewards, this blog post will provide further insight so you can confidently determine if multi-family investing is a good fit for you.
One of the biggest differences between multi-family versus single-family properties is that there’s a decreased risk of losing cash flow.
This is due to the fact that with multi-family properties, you have multiple units and multiple tenants, which means you have multiple forms of income each month.
If you lose one tenant in a multi-family property, you still have stable cash flow since there are multiple tenants on property.
With single-family units, on the other hand, if you lose one tenant you would be stuck with a property with 100% vacancy, which means no cash flow.
Overall, you can count on numerous occupied units with multi-family properties to contribute to a positive cash flow for you on a consistent basis.
Additionally, you don’t have to worry about as many economic losses as the need and demand for multi-family properties stays fairly high regardless of what the economy looks like.
When it comes to real estate, one of the things that scares people off the most is the preparation for all of the things that goes into it.
You have your loan applications, down payment savings, closing costs, inspections, appraisals, the list goes on.
While all of those things can seem like a massive headache, one of the best parts about multi-family investing specifically is that there is a much easier financing process and more simplicity.
This is thanks to the fact that multi-family properties aren’t as risky for banks.
Generally speaking, banks can confidently predict that the cash flow of a multi-family property with multiple tenants will be consistent and steady versus a property that only houses an individual or one family.
What this means for you as an investor is that the bank doesn’t look at solely your income to grant you the loan. Instead, they will look at the details, history and projections for the property so they can accurately gauge the return.
The real value in this is that you can typically very easily get approved for the loan you need without jumping through hoops or needing multiple loans.
You know that old saying, “don’t put all of your eggs in one basket?” That rings true for many things in life, but especially when it comes to investing your money!
Essentially what this means is that you want to diversify your investments to make sure that all of your funds aren’t wrapped up into one single strategy.
A common diversified investment portfolio includes: real estate, bonds, stocks, fixed income, etc.
The reason it’s important to make sure that your money is being invested into different options is because all of these assets will respond differently to the same economic event, so you’re essentially setting yourself up for less risk.
For example, if you invest the majority of your money into stocks associated with the travel industry, such as airlines, without also investing in real estate or other stock options, you’re risking a drop in your investment value if bad news affects the travel industry.
This most recently happened with the onset of the COVID-19 pandemic where all travel industries were majorly impacted, so you can see how having other investments in place to counteract the risk of others is a good move.
Aside from specific industries, it’s also smart to diversify the geographical locations that you’re investing in and one of the easiest ways to do this is through multi-family properties.
When it comes to investing, you typically want to make sure you’re putting your money into a place that is going to benefit you in multiple ways.
Aside from a stable cash flow and a solid return on your investment, you also want to consider how your investments can positively impact other parts of your life.
In addition to cash flow, easy financing processes and diversification, another huge reason that people choose to invest in multi-family properties is because of the tax benefits that come along with this investment choice.
There are four major tax benefits that you can expect from multi-family investment, including depreciation, cost segregation, 1031 exchange and passive income tax benefits – we discuss the specifics of each of these in THIS blog post!
With any pro comes a con and multi-family real estate is no different!
While we are huge advocates of getting involved with multi-family investing, we also want to be up front and make sure you’re fully aware of both sides.
When you think about the differences between multi-family properties and single-family homes, one of the largest and most obvious differentiators is that there will almost always be a greater initial investment needed for multi-family properties.
That’s because you’re putting your money towards a much larger complex that will house far more tenants than a single home. The upside to this is that the greater investment = greater reward!
The initial investment will always vary depending on the location of the property, but you can almost always expect to need at least a 20% down payment of the property price.
With that said, we try to make our process at XSITE Capital as smooth and simple as possible, so our investors can typically invest as little as $50,000 in most projects.
Overall, if you have the cash and the ability to make the greater initial investment, you can confidently expect that it will pay off in the long run.
When people learn about the tax benefits and the ROI of multi-family investing, they typically start scooping up the best of the best deals very quickly.
This can be challenging for those who aren’t as experienced in this type of investing and it can feel frustrating when you aren’t able to jump into the deals that you really want.
This is why building relationships with quality investment groups is so key. Here at XSITE Capital, we make it easy for our investors to get first access to the deals that are appealing to them through our Investor’s Community!
Unlike that of single-family properties, you can’t hop on Zillow and expect to be flooded with large amounts of multi-family properties to invest in.
Sure, you might find a duplex here and there, but it’s rare that a large complex will be at the tip of your fingers from a quick search.
It’s for this reason that being involved with an investment group can be so valuable! Investment groups do the hard work for you by building relationships with trusted brokers, scouting out the best markets and finding deals that will produce the best results.
Lastly, one of the biggest challenges for multi-family investing is knowing that you’re investing in the right markets. Not all properties are created equal and you want to make sure that you’re putting your money into a good pool so that you truly do benefit from it.
If you’re interested in a multi-family deal, but you aren’t sure if it’s a good move, make sure you consider 4 main factors before jumping in, including::
We provide more insight for each of these categories in THIS blog post!
Overall, this is yet another reason that linking arms with an investment group is a good idea so that you can trust that the market has been thoroughly researched and that the properties chosen are lucrative.
At XSITE Capital, we take our market research very seriously by looking at:
Here’s a closer look at our own market and property selection process:
If you’ve been learning about multi-family real estate investing and are ready to take the plunge further into your investment journey, we are here for you!
The XSITE Investors Community is for accredited investors where you can receive:
Today, XSITE Capital currently has over $168 million portfolio value, has helped empower and grow over 1,000 minds and proudly has over 800 doors under management.
We welcome new investors daily and would love to welcome you!
Many people hear about multi-family investing, but they don’t fully realize the benefits that come with it.
So, let’s breakdown the 6 major benefits of multi-family investing
1. Multi-family real estate is a recession-resilient investment.
Most investors are expecting a recession following the effects of the current pandemic and with stocks soaring, many are also considering whether it’s a bubble.
But one investment that stands the test of time during bear and bull markets is multifamily real estate investments.
So, if you’re looking for an option to round out your investment portfolio, this is a good place to start.
2. Demand for apartment rentals is rising.
According to the Pew Research Center, more households are renting now than at any time in the past 50 years.
Between the 10-year period from 2006 to 2016, the number of households grew, but renters outpaced homeowners in that growth.
Fast forward 4 years later to 2020, and the US Census Bureau indicates that rental vacancy rates have decreased and median asking rent continues to increase.
The asking price for sale units has also decreased.
While the economic downturn will impact apartment demand, the overall growth rate is sufficient to absorb new supply entering the market.
3. Apartments offer a steady stream of income.
The statistics show that the apartment rental market continues to increase in demand and, therefore, value.
So, you have an opportunity to diversify your investments into an option that delivers a steady income stream which you can expect each month.
Apartment or multifamily units offer better economies of scale and thus higher returns on investment.
As of August 2020, the NCREIF Property Index estimated annualized returns over a 5 year period on real estate investment at 5.79%.
4. They are true passive income sources.
We’re often told that wealth starts with building passive income streams, where your money continues to work for you and nowhere is this more evident than in a multi-family investment.
Without needing to lift a finger to maintain your properties, your investment in a multifamily unit(s) continues to yield income month over month, plus your property continues to appreciate as time goes by.
5. Multifamily investing has many tax benefits.
Multifamily real estate investment offers high tax-advantages that many people don’t know about.
If you use a mortgage to finance your investment (which most savvy investors do) you can take a high mortgage deduction in the first year of ownership.
Then, you can depreciate the property, which means you can set off this depreciation against your rental income.
This alone makes multifamily real estate investing an attractive option, especially for those savvy with the tax laws.
6. There are multiple ways to get involved in multifamily investment.
There are multiple ways to get involved in this type of real estate investment including the most passive route and invest via syndication or you can invest in a multifamily fund or a real estate investment trust (REIT).
If you want to learn more about how to get started in multi-family real estate investing, here are two ways to get started:
1. Join the XSITE Capital Investment Club
2. Attend one of our free Monthly Meetups
3. Dive into our resources including, the XSITE Capital Blog or connect with us on LinkedIn
Generating passive wealth – aka making money while you sleep – is a nice idea.
But as a busy professional, most of the passive wealth generation ideas being bandied about aren’t truly passive. Or at least they won’t be truly passive until a few years down the road. Most require your active participation to get them up and running.
Based on your workload now, you just don’t have the time for that.
You don’t need a second job, just additional sources of revenue.
Therefore, you need a truly passive avenue to invest, which offers real returns.
Truly passive wealth means investing in assets that generate income for you, meaning your money works for you, not you working to earn.
The aim of passive wealth generation is to help you eventually replace your earned income to a point where you can choose to work or not.
It frees up your time to take on challenges you want to focus on or spend more time with your family.
For those who successfully achieve true passive wealth generation, they can retire from being “busy professionals”, and start to live life as they see fit.
You will notice that we didn’t use the term passive income, and that’s deliberate.
Wealth creation is a long-term process and will not happen overnight. It also requires the discipline for reinvestment.
With passive wealth, it also means that in addition to your stable, predictable income, you are also enjoying asset appreciation and that primarily comes from investing in real estate.
The typical real estate investment process requires that you essentially become a property manager. You’ll need to manage tenant problems, handle late-night phone calls, management issues – the works. And even if you outsource property management, these are still ultimately your responsibility.
On the other hand, there’s property flipping. This means buying, fixing, and selling a property. This requires your active involvement in all aspects of the process. Hence, this cannot be a source of passive real estate investment.
None of these equate to what we recommend as passive wealth creation through real estate investment. As a busy professional, you do not have the time to dedicate to these types of projects.
The third option is one that we use at XSITE Capital to generate passive wealth for our clients who are often extremely busy professionals. To consider real passive wealth, you need to invest in real estate and the best option for passive real estate investment is by investing in commercial and real estate projects where you won’t need to manage the investment or the properties.
In this option, active ownership of property doesn’t mean ‘landlord’ with the attendant headaches. With passive investment, you allow those with the expertise to generate and manage the property investments on your behalf. You enjoy the returns in terms of income, tax benefits and asset appreciation.
This is often referred to as apartment syndication and is one of the smartest ways for real estate investment.
Building a strong wealth foundation – one that can last through multiple generations – should be your goal for passive wealth generation.
As long as you have the discipline and the right investment partners with you, you can build your passive wealth system.
If you’re interested in learning how to build passive wealth through multifamily real estate investment, click here!
If you’re like us, learning about the tremendous upside to investing in multi-family properties is exciting.
The reality is it can dramatically increase your passive income streams over the next 2-7 years.
Life is busy though, and sorting through the details can feel overwhelming. To help ease some of that overwhelm, here are a few benefits to consider when considering whether or not to invest in multifamily real estate.
1. Apartment values are based on net income, not market comparables.
This is one of the most impressive benefits of multifamily investing.
Consider that in a 150 unit apartment complex, raising the rent by just $15/month increases the total property value by more than $385,000. [(150 units X $15 X 12 months) / 7% Cap Rate].
Let’s see your Hedge fund manage that!
2. Returns usually beat the stock market.
If you had invested $1 in the stock market in 2002, you’d have about $2 in 2018 (taking inflation into account).
That’s no way to plan for a future of passive income for you and your family.
3. Multifamily syndication loans are NEVER dependent on your income or credit.
Multifamily syndication loans are based on the value of the property, not your own personal assets.
In other words, investment in multifamily syndication allows you to get into a growth position with extremely limited personal liability.
Passive investors do not sign on loans in a multifamily syndication.
4. Multifamily investments are usually LESS VOLATILE than single-family investments.
During recessions, rent typically remains much more stable than home prices.
And as homeowners are displaced due to rising mortgage rates and/or job losses during recessions, they turn to apartments, leaving multifamily values with small declines at worse and thriving at best during flat/negative markets.
5. Multifamily investing is a growing market.
Millennials aren’t buying homes at expected rates and their preference for renting started before the 2008 economic crisis.
Meanwhile, retiring baby boomers are moving to urban apartments, perhaps to be near their children who have opted for city living, or to take advantage of the perks of city life themselves.
Finally, the overall market is shifting to a rental environment.
Homeownership rates are falling, and have been falling for over 12 years. Even the National Association of Realtors has acknowledged this reality – it’s being referred to as the Great Housing Reset.
Even if you’re an inexperienced investor, now is a great time to learn more about investing in multi-family properties!
If you’re thinking about investing in multifamily real estate, there are 6 main questions to ask the investment group you’re working with to ensure it’s a good fit.
We ultimately believe that multifamily apartment investing is one of the smartest things you can potentially do with your capital because the properties typically hold their value over time and they usually increase in value based on income (not comparables) while also offering excellent risk-adjusted ROI.
That said, there’s a lot to consider when deciding whether or not to become a multifamily property investor. Here are some important factors to consider:
1. How long does it take to recoup an investment in a multifamily apartment complex?
Typically, you’ll receive quarterly dividends for your investment after an initial stabilization/rehab period.
Additionally, syndication companies such as XSITE Capital project that your investment will double in 5-6 years.
If you’re looking for a highly liquid investment, multifamily investing is likely not for you.
If you’re looking for a comparatively high rate of return via an attractive risk-adjusted investment vehicle however, multifamily investing is one of the best options on the market!
2. Will I have to do any work on the property once I invest?
One of the best things about working with an investment group like XSITE Capital is that we employ a professional team to manage the property.
What means to you as an investor is you can simply invest the initial funds and then watch your investment return dividends and equity gains!
3. How much of the split will I keep as an investor?
The answer to this question will always depend on the property, but it’s a great question to consider before investing.
One of our most recent investment, The Griffin at Petworth in Washington, D.C, offered an 80/20 split for investors.
Others may do 70/30 or 60/40 splits with the most going to investors.
4. What is the minimum investment?
Again, each property is different, but typically there is a $50,000 minimum investment, while some properties may offer $25,000 minimums.
5. What are the tax implications of multifamily investing?
When you invest in multifamily properties, you can typically expect prorated depreciation benefits that can lower your taxes.
We advise that you discuss your specific tax situation with a CPA to learn how your personal finances will be impacted.
For more general tax benefits that you can expect with multifamily investing, click here.
5. How do I choose the right property?
Choosing the right multifamily property depends on your goals.
First, you need to decide whether you’re more focused on short-term or long-term gains.
Class A properties will have more long term gain, while Class C will have more short term gains but a shorter project lifespan. Here’s a breakdown of the differences in each Class type.
Second, decide how much you want to invest and find the right syndication company that will offer a competitive ROI.
It’s best to discuss your options with a professional and we’re always here to help!
Overall, investing in multifamily properties can be a great addition to your portfolio, but doing your due diligence before making that move is advised.
One of the first things you learn about investing is that diversification is vital.
When you have a diverse portfolio, a negative hit to one of your assets doesn’t drag the remaining assets down.
It’s why we divide our assets between stocks, CDs and property. It’s why we short one company while going long on another. It’s a safety net, and it’s one of the most important components of your investment strategy.
When you invest in traditional single-family real estate, you throw this principle out the window.
Why? Because you put a large chunk of your cash into ONE piece of property.
That piece of property must be purchased (or rented) by ONE family in order for you to turn a profit. In between, you’re subject to the local market, neighborhood comps dragging down your home’s value, and deals that could fall through.
And yet, real estate is a historical winner because, with a few exceptions, real estate assets rise over time.
Short answer: invest in multifamily apartments.
When you invest in multifamily properties, consider that each tenant is just a percentage of your investment.
If one or a few tenants move out, your investment is still strong.
Your management team can cover small losses because the rest of the building’s rental income is stable.
You don’t have to worry as much about factors like the local market or neighborhood comparables because multifamily investing is valued based on the income of the apartment – not comps.
Beyond diversification there are many other benefits of investing in multifamily real estate, including major tax benefits!
Ready to experience these benefits for yourself? Join the XSITE Investment Club to get started.
For the first time in history, home ownership is on a steady decline and the number of people who elect to rent is growing. In fact, home ownership is down in 90% of U.S. cities and in 96.2% of cities with more than 1 million residents. Experts are calling it the “Great Housing Reset.”
When you invest in multifamily real estate through syndication, you stake your claim in this booming industry.
Even with all of the uncertainty in the economy, now is an excellent time to diversify your investment portfolio with XSITE Capital Investment.
When you invest with XSITE Capital, you’ll receive a special investment approach that is proven, research-backed and data-driven that aims to identify, acquire, manage, stabilize, optimize and divest various Class B and C properties.
All of our properties come with a 3-7 year exit strategy because we believe you should always know what to expect and when to expect it.
We invest in multifamily projects in emerging markets across the country and before investing we thoroughly research and evaluate different aspects, including the metro location, sub-markets, neighborhoods, target properties, employment trends, sales trends, and other key indicators to choose thriving communities.
It really is an exciting process, and we welcome you to take this journey with us!
