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Why Invest in Multifamily?Many people have seen their homes appreciate, and so understand the value of real estate from that respect, but that only scratches the surface of why commercial multifamily is a great investment vehicle. There are actually a ton of benefits to passively investing in apartment buildings but I will try to keep it brief and restrict it to what I view as the top 3 reasons it should be considered as part of almost anyone's investment portfolio. Risk reduction: Everyone knows that markets do not like uncertainty. Stocks can fluctuate wildly based on the latest headline and this has real implications for peoples 401ks and their nerves. Luckily, commercial multifamily has proven to be resilient, and far less volatile than stocks. Risk is further reduced because it is recession resistant. Even if people can't afford a down payment on a new home, they still need a place to live and often stay renting. So vacancy isn't likely to go down in a recession, rather it may go up! Sure there may be movement between asset classes. Tenants in A class apartments moving to less expensive B class apartments and so on, but many will stay in apartments. Tax Benefits: There are a ton of benefits to investing in real estate, even as a passive investor in commercial multifamily. Many are familiar with depreciation from their personal residence, which they use over the course of a 30 year mortgage to reduce their taxable income. In commercial deals we often put that into overdrive with accelerated depreciation. Essentially, instead of depreciating equally over a 27.5 year (usable life )timeframe, we conduct a cost segregation analysis and depreciate over 5-7 years. That depreciation is then passed on to our passive investors through a K-1 tax form. This depreciation "loss" often wipes out the taxable impact from any distributions.* Diversification: Everyone knows they shouldn't put all their (investment) eggs into one basket. While it is certainly prudent to be contributing to a 401k, especially if your company matches, diversifying your portfolio with something outside the stock market can shield from market shocks. Having provided just a few examples of the advantages of commercial multifamily, we think it is the smartest and safest step you can take in diversifying your investment portfolio and ultimately growing your wealth.
What type of returns can I expect if I invest with ZANA?Our average hold time is 5-7 years, but we talk with all our potential investors to determine their investment goals. Some will be seeking higher returns at a higher risk whereas others may be more risk averse and fine with lower, yet competitive returns. This is why our returns vary and every deal is different. We share deals with potential investors through an Offering Memorandum and invite them to invest, only if it meets their respective goals.
Do I have to be an accredited investor to invest with ZANA?No, on most of our deals we can also accept sophisticated investors with whom we have a pre-existing relationship. With any investor, communication is key. We seek to understand why you're investing and your goals. We will only invite you to invest if we believe our interests are aligned. Occassionally we will have deals that are only available to accredited investors based on how they are structured under SEC regulations.
What is the difference between an accredited and a sophisticated investor?According to the SEC, "an accredited investor, in the context of a natural person, includes anyone who: earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence). A sophisticated investor in contrast, has no minimum net worth requirement specified by the SEC and the definition is overall a bit more subjective. It can best be described as those investors with sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment. In order to make this determination, we at ZANA Investments provide a questionnaire to all potential investors. Based on this questionnaire and multiple phone calls or emails, we'll decide if each potential investor is a good fit for us and if our investments are a good fit for their investment goals.
What is the hold time for your deals?No two deals are the same so we evaluate an exit strategy based on peak profit and the goals of our investors. Exit is most often projected between years 5-7, but we constantly review the numbers and the market conditions, assessing the opportunity for an earlier exit.
Have more questions?
*We are not attorneys or tax professionals and nothing contained on this page or any ZANA Investments webpage should be construed as tax or legal advice.
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