When modeling the potential profitability of a multifamily investment, there is a common tendency to focus only on the return generated by a property’s cash flow as measured by metrics such as internal rate of return or cash-on-cash return. This isn’t necessarily wrong, but it doesn’t tell the whole story. It ignores the tax benefits associated with a multifamily investment, which can be a major component of total returns.
Multifamily owner/operators who proactively manage their potential tax liability may be more likely to realize higher returns than those who don’t. I encourage up-and-coming investors to utilize three specific strategies.
