For many reasons, investors may choose real estate over other asset classes, like bonds, commodities, and other securities. In fact, Tiger 21 reports that 26% of its members (investors) allocate their investments to real estate. [1] Multifamily real estate, encompassing properties like apartment buildings and townhomes, falls under the investment real estate umbrella. Investors can potentially benefit from passive income, easier financing, diversification, and appreciation with multifamily compared to single-family homes. [2][3]

Multifamily real estate offers a tangible, physical asset that can appreciate over time and, with the right strategy, could provide stability and profitability. One of the most compelling reasons to invest in multifamily is the potential for portfolio growth and a consistent and reliable source of cash flow. [4] This article will discuss these reasons and other characteristics investors consider, including income stability, scalability, tax advantages, economic resilience, and supply/demand dynamics. 

INCOME STABILITY

Multifamily cash flow is often more predictable than that of other markets, as rental income is collected monthly and from more than one source (multiple residents). Rental income should cover mortgage costs, property maintenance, and other expenses, and any surplus becomes profit. [5][6] Unlike stocks or bonds, which fluctuate based on market conditions, multifamily real estate often exhibits more stable, long-term growth.

SCALABILITY

Multifamily real estate’s profitability is rooted in growing a portfolio by acquiring more properties and units. Investors can capitalize on economies of scale by investing in multiple-unit properties. [8]

Economies of scale refer to the cost advantages of owning larger commercial multifamily properties, where the size of the operation mitigates ownership costs. For example, as the number of units in a property increases, the price per unit to operate and maintain decreases. The same formula applies to bulk purchasing and rental income; the more units on the property, the more opportunities there are to generate income at a lower expense.

TAX ADVANTAGES

Multifamily provides several tax advantages that make property investment attractive. For example, investors can deduct the cost of acquiring and improving rental property over time through depreciation. [9]

This non-cash deduction allows real estate investors to write off the property’s cost over 27.5 years for residential and 39 years for commercial properties. This reduction in taxable income can result in substantial tax savings. Investors can even depreciate improvements made to the property to enjoy more tax benefits. [10] While 25+ years seems a long time for some, investors can benefit from bonus depreciation. Bonus depreciation refers to an IRS tax incentive code allowing taxpayers to expedite deductions on the asset they invest in. 

Simply put, some parts of a property depreciate much faster than others—e.g., fixtures, floors, etc. Rather than waiting for the entire “useful life” of a property, investors can depreciate the cost of eligible assets sooner than 27.5 years. Steven de la Fe of Taxfyle explains, “Bonus depreciation allows you to accelerate tax deductions […] Under the Tax Cuts and Jobs Act (TCJA), bonus depreciation was increased to 100%, letting businesses immediately deduct the full cost of eligible assets.” [8] However, it’s important to remember how political events such as new presidential administrations can impact investment real estate. While depreciation had once increased to 100%, depreciation percentages are now phasing out (60% in 2024; 40% in 2025; 20% in 2026). [8]

Another significant tax advantage is deferring taxes through a 1031 exchange. This strategy allows investors to sell a property and reinvest the proceeds into another like-kind property without immediately paying capital gains taxes on the sale. [7] By deferring these taxes, real estate investors can leverage their capital more effectively, increasing their potential return on investment (ROI). In a private placement fund, however, the decision to pursue a 1031 exchange rests solely with the fund manager, not the individual investor. So, investors may not benefit from a 1031 exchange.

Even the interest on loans used to acquire or improve rental properties is deductible, offering further tax relief. These tax benefits help investors maximize their profitability and manage their tax liabilities effectively. [6]

ECONOMIC RESILIENCE

With inflation already a significant concern, investors are looking to protect their capital while also potentially benefiting from rising costs and interest rates.  Multifamily real estate has consistently been the favored asset class for real estate investors as an effective inflation hedge due to its unique advantages:

• Short-Term Leases: Apartment leases generally last no more than one year, allowing landlords to act in real time and adjust their rents accordingly when faced with rising costs.
• Essential Expense:  Shelter is vital to life and one of the last things people will sacrifice. Most people will pay their rent before paying for other expenses.
• Value-Add Strategy: Returns can be further enhanced by employing a value-add strategy that focuses on renovations, management efficiencies, and amenity upgrades to justify higher rental rates. [9]

SUPPLY-DEMAND DYNAMICS

Supply within multifamily real estate represents the total number of deliveries, or completed properties, available. Demand is the total number of people desiring to occupy the property. It is essential to differentiate new supply from unit starts. It was predicted in late 2023 that deliveries (completed properties) would hit a 50-year peak in 2024 while unit starts (development) would come to a grinding halt. [10] 

Today, most U.S. markets do not have enough housing supply to keep up with demand. Additionally, rising interest rates make homes unaffordable for “would-be” home buyers, increasing the demand for apartments. More demand than supply places upward pressure on rental rates. [11] This ongoing supply/demand imbalance will likely continue to impact long-term multifamily market fundamentals positively. [10]

WORK WITH BAM CAPITAL FOR MULTIFAMILY REAL ESTATE INVESTING

BAM Capital prioritizes accredited investors who want to enjoy passive income and all the other benefits of multifamily private placement. As the private equity arm of The BAM Companies, BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. BAM Capital’s investment strategy aims to create forced appreciation while mitigating investor risk. To date, the brand has successfully managed over $1.7 billion in assets across ~9,000 apartment units.

Remember that no investment is risk-free. Before making financial decisions, consult your investment advisor and schedule a call with a BAM Capital investment team member.

Disclaimer: All investments carry risk, including potential loss of capital. This content is for informational purposes only and is not financial, legal, or investment advice, nor an offer or solicitation to buy or sell any security. Consult an independent advisor for personalized guidance and contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Any financial terms, projections, or forward-looking statements contained herein are hypothetical in nature and should not be interpreted as guarantees of future performance or safety. Such statements reflect Bam Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Past performance does not predict future results. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Bam Capital offers investment opportunities under Rule 506(c) of Regulation D exclusively for accredited investors as defined by the SEC. Verification of accredited investor status is required prior to participating in any investment.

© 2025 Bam Capital. All rights reserved.

SOURCES:

[1]: Tiger 21. (2024). “Asset Allocation Report.” https://tiger21.com/wp-content/uploads/2024/06/AAR-Q1-2024-Public-Final.pdf

[2]: Google Generative AI. (2025). “Multifamily falls under the umbrella of real estate.” https://www.google.com/search?q=multifamily+falls+under+the+umbrella+of+real+estate

[3]: Google Generative AI. (2025). “Why do investors choose multifamily real estate?” https://www.google.com/search?q=why+do+investors+choose+multifamily+real+estate

[4]: BAM Capital. (2024). “What are the pros and cons of real estate syndication?” https://bamcapital.com/pros-and-cons-of-real-estate-syndication/ 

[5]: Investopedia. (2024). “Investment Real Estate: Meaning, Benefits, Risks.” https://www.investopedia.com/terms/i/investmentrealestate.asp

[6]: BAM Capital. (2024). “How investing in real estate is beneficial to growing wealth.” https://bamcapital.com/investing-real-estate-achieving-wealth/

[7]: Forbes. (2023). “Exploring The Pros And Cons Of Real Estate Investment.” https://www.forbes.com/sites/forbesbusinesscouncil/2023/10/30/exploring-the-pros-and-cons-of-real-estate-investment/

[8]: Taxfyle. (2025). “How Can You Benefit from Bonus Depreciation in Real Estate as an Investor?” https://www.taxfyle.com/blog/bonus-depreciation-for-real-estate-investors#:~:text=Taxpayers%20must%20comply%20with%20evolving,depreciation%20will%20be%20fully%20eliminated.

[9]: BAM Capital. (2022). “Why multifamily provides an effective hedge against inflation.” https://bamcapital.com/why-multifamily-provides-an-effective-hedge-against-inflation/ 

[10]: BAM Capital. (2024). “Top 5 predictions for multifamily real estate in 2024.” https://bamcapital.com/2024-predictions/