Multifamily Has a Lower Risk Profile than Traditional Investments

Part 4 of a 10 Part Series

I will never forget walking in my best friend’s house on October 19, 1987 and seeing the look on his dad’s face. He was white as a ghost. He didn’t say anything, just pointed to the TV. The newsreels were rolling with Wall Street traders falling to their knees and the headline flashing, “The Dow Plunges 22.6%”! In a near instant, my friend’s college tuition was nearly wiped out.

Many people were burnt by this infamous event called “Black Monday” but eventually regained their courage and put their money back in the stock market to increase their returns. A frenzy began in 1999 when the dot.com revolution was taking the world by storm. Everyone was putting their nest eggs into these fast-growing companies. Unfortunately, they turned into the dot.bombs, with the NASDAQ plummeting 78% peak to trough. I know dozens of people who were forced to extend or delay their retirements as a result of their devastating losses.

I could repeat similar stories from the 2008 market crash that pushed our economy into the Great Recession. It was all too personal for me. As a member of the Investment Committee for a traditional wealth management company, I was helping investors clean up the mess. I listened to weary clients afraid to put their hard-earned money into stocks yet again. We were telling them that they needed to take the risk, especially because the fixed income markets were only offering rock-bottom rates. They continually asked us if there was another way to generate their much-needed returns without taking the same level of risk. I kept coming up empty …until I found multifamily!

Multifamily is different for two primary reasons. First, you are buying a physical asset. You can literally touch it and feel if you want. Residents may come and go, but the cash-flowing units cannot go with them! The second reason is that your investment is secured by the monthly cash flow generated by multiple tenants. And as I mentioned in Part 2 of the series, your return barely budges if one tenant doesn’t pay on time.

The other risk-reducing differentiator for multifamily investors is that hazard insurance will cover the income the properties generate if disaster hits.

I hope that you found this helpful in your quest to find the best place to invest your nest egg. We at East Light Investments would love to discuss the possibility of partnering with you. Please don’t hesitate to contact me directly if you have any questions.

Click Here for Part 1 of the Series: Interest Rates Work For You

Click Here for Part 2 of the Series: More Consistent Income than Single-Family

Click Here for Part 3 of the Series: Capital Appreciation: How Cap Rates Work for You

I hope that you found this helpful in your quest to find the best place to invest your nest egg. We at East Light Investments would love to discuss the possibility of partnering with you. Please don’t hesitate to contact me directly if you have any questions.

Karen Oeser, CFA
Principal
karen@eastlightinvest.com
864-551-1820
www.eastlightinvest.com

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