We’ve all read articles that tell us how much money we would have made if we had invested in a major stock when it first became public. If we would have invested $100,000 in Apple in 2009, it would be worth over $1 million today. However, if you waited and invested that same $100,000 in Apple in 2014, you would have lost over $70,000. So, in order to make huge gains in the stock market, you must “time the market” or, in other words, speculate.
That is one of the major advantages that real estate investing, and multifamily investing in particular, has over investing in the stock market. As long as you follow my Three Immutable Laws of Real Estate Investing, you will make consistent cash flow without having to time the market.
And as evidence to support this claim, here is how much money you would have made if you invested $100,000 into a multifamily building every five years starting in 1985, according to the NCREIF Property Index:
If you invested $100,000 in 1985, you would have made $43,370 in five years.
| Year | NPI | Cash Flow |
| 1985 | 11.14% | $11,140 |
| 1986 | 6.93% | $6,930 |
| 1987 | 6.78% | $6,780 |
| 1988 | 9.97% | $9,970 |
| 1989 | 8.55% | $8,550 |
| Total | 43.37% | $43,370 |
If you invested $100,000 in 1990, you would have made $26,130 in five years.
| Year | NPI | Cash Flow |
| 1990 | 5.69% | $5,690 |
| 1991 | -1.31% | -$1,310 |
| 1992 | 1.71% | $1,710 |
| 1993 | 8.47% | $8,470 |
| 1994 | 11.57% | $11,570 |
| Total | 26.13% | $26,130 |
If you invested $100,000 in 1995, you would have made $59,260 in five years.
| Year | NPI (%) | Cash Flow |
| 1995 | 11.19% | $11,190 |
| 1996 | 11.07% | $11,070 |
| 1997 | 12.33% | $12,330 |
| 1998 | 13.43% | $13,430 |
| 1999 | 11.24% | $11,240 |
| Total | 59.26% | $59,260 |
If you invested $100,000 in 2000, you would have made $51,020 in five years.
| Year | NPI | Cash Flow |
| 2000 | 12.41% | $12,410 |
| 2001 | 9.06% | $9,060 |
| 2002 | 8.48% | $8,480 |
| 2003 | 8.62% | $8,620 |
| 2004 | 12.45% | $12,450 |
| Total | 51.02% | $51,020 |
If you invested $100,000 in 2005, you would have made $18,640 in five years.
| Year | NPI | Cash Flow |
| 2005 | 19.68% | $19,680 |
| 2006 | 13.89% | $13,890 |
| 2007 | 10.91% | $10,910 |
| 2008 | -7.20% | -$7,200 |
| 2009 | -18.64% | -$18,640 |
| Total | 18.64% | $18,640 |
If you invested in 2010, you would have made $62,570 in five years.
| Year | NPI | Cash Flow |
| 2010 | 17.19% | $17,190 |
| 2011 | 14.63% | $14,630 |
| 2012 | 10.80% | $10,800 |
| 2013 | 10.03% | $10,030 |
| 2014 | 9.92% | $9,920 |
| Total | 62.57% | $62,570 |
Since NCREIF began calculating their property index, apartments have seen a positive cash flow during every five year interval, even during the period that includes the 2008, 2009 economic recession. The best five year period is 2010 to 2014 (62.57% NPI) and the worst five year period was 2005 to 2009 (18.64% NPI).
If you are interested in seeing the quarterly NPI breakdown for apartments, other commercial real estate classes.
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Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.
