• Bonds and CDs offer interest payments only. There is zero capital appreciation.
  • A Real Estate investment delivers in three areas – appreciation, cash flow and favorable taxation.
  • While a CD is available now (in 2023) at rates as high as 5%, this level of return is only locked in for the term of the CD. The maximum yields are for a 12-month term, whereas a 5 year term CD yields around 4%. (this is an indicator that interest rates are headed down, usually the longer term CD will have the higher interest rate)
  • The CD interest is subject to full taxation.
  • Once expired, the investor will need to look for the next investment, which will be a CD at a lower interest rate or something else (like real estate)
  • Multifamily real estate starts at a cash on cash yield of 3%, most of which will be tax free. Over the years, this yield will climb up, possibly reaching 8% or more.
  • At the same time, the multifamily real estate investment is also gaining value.
  • At the end of 10 years, the investor will be many times better off, possibly having made just one investment decision for the 10 year period!
  • Municipal bonds are better in that they are tax exempt. However, they do not appreciate. The bond market has been extremely volatile in the last few years, due to rising interest rates. While bonds are, in theory, supposed to be conservative investments, we have found them to be very susceptible to Federal Interest Rate hikes. The interest rate policymakers put bond performance out of the investors’ control.