Maximizing Wealth with Multi-Family Real Estate: Expert Insights from Gary Nakauchi

Gary Nakauchi owns and operates a small number of multifamily units in the Phoenix area, and in the following article, Gary Nakauchi discusses the benefits of these types of real estate investments.

Real estate remains one of the best investment options for consistently high returns.

But it’s not as simple as just buying a home or rental unit and waiting for the cash to roll in. For many, multi-family real estate investing has proven to be a lucrative approach — and one that is often a good path to take for investment beginners.

Gary Nakauchi explains that multi-family real estate investing is centered on properties such as duplexes, mixed-use properties, condominiums, apartment complexes, and any type of property divided up into individual living spaces.

Real estate investing is considered one of the best ways to diversify any portfolio and generate reliable income, but multi-family property investments can take an investor to the next level quickly and easily. Here’s why:

Gary Nakauchi Notes the Predictable Cash Flow

Even when the economy is volatile real estate investment is usually a safe bet. That’s because the cash flow is predictable and reliable, especially in areas that maintain strong real estate markets during times of high inflation or recession.

Investors can expect a rental check month after month, year after year, which makes them more comfortable with making additional real estate investments.

Easier Finance Terms

It takes a fair amount of money to invest in any form of real estate, and both single-family real estate and multi-family real estate are expensive for different reasons.

Gary Nakauchi explains that both usually lead to strong cash flow, but the upfront price for multi-family units may be more than a single-family home, depending on location and condition.

That said, multi-family real estate may come with fewer barriers to loans since it’s seen as a less risky investment when multiple vacancies may not mean drastically reduced cash flow when factoring in the number of units.

There’s also the likelihood of qualifying for cheaper down payments and lower interest rates if one of the properties within a multi-family unit is occupied by the owner/investor.

Low Effort

Gary Nakauchi says that real estate investment is not always passive income, but it can come close. Many multi-family investors decide to hire a property manager to take care of the property, such as helping with maintenance issues, collecting rent, or overseeing upgrades.

Occasional work is required though, whether there’s a property manager or not. Management teams can do a lot of the dirty work, but an owner still needs to make certain decisions, such as when to evict someone, when to raise the rent, and when upgrades are economically feasible.

Tax Benefits

Tax experts have long emphasized the tax advantages of multi-family real estate investing. Properties are usually financed through a mortgage, with investors then deducting the interest paid on that mortgage for the year.

Gary Nakauchi reports that since such properties can be depreciated over time, even if it actually increases in value, that depreciation is often used to offset much of the annual rental income, turning into an asset class that’s highly attractive for investors of all experience levels.

Investment Flexibility

Multi-family real estate offers numerous options for investors, including choosing new properties, renovated properties, or neglected properties in need of a flip. If an area is particularly desirable for students, apartment investing may be the best route. Investments can be made on properties that come with year-long leases or steady cash flows from being a short-term rental or vacation property.

Preferred Returns

Gary Nakauchi says that this benefit is for those who decide to invest in real estate funds that are private equity, but it’s an approach to consider to build wealth quickly. Investors in these funds are due a return before the syndication or the fund earns one as well.

That means that if a fund offers a 10% preferred return, an investor gets that amount before a private equity fund enjoys a profit as well.

A Robust Portfolio

Real estate investing isn’t just popular because of its direct cash flow. It can also be the quickest way to diversify a portfolio. With reliable cash flow, many investors put that extra money into additional multi-family units or up their investment percentage.

Gary Nakauchi explains that they may feel more comfortable branching out into other lucrative real estate markets as well.

The additional investments don’t have to be in real estate. With successful multi-family real estate investing, individuals may branch out quicker to boost 401(k)s, invest in stocks and bonds, or check out IRAs.