What Are Family Offices (HNWI) Investing into in Real Estate?

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A high-net-worth individual, or HNWI, is someone with liquid assets that go above a certain figure. This term is used in the financial industry to classify individuals that are considered highly wealthy.

There is no exact amount that determines if a wealthy individual fits this category. However, people who are classified as HNWIs typically have at least $1 million in liquid financial assets and a net worth of seven figures or more. They usually have access to unique benefits and opportunities because of their high net worth. [1]

HNWIs generally belong to wealthy families that have built their wealth across generations. They tend to prefer long-term investing strategies over short-term ones because their goal is to not only maintain their wealth but grow it even further. These families are more comfortable with illiquid assets. They also understand the importance of surviving periodic financial or economic crises. [2]

HNWIs generally seek the assistance of financial professionals to manage their money. This is where family offices come in.

Best Real Estate Investing Vehicles for Family Offices

Family offices are private firms that manage the wealth of ultra-high-net-worth individuals. They provide many different services for affluent individuals or families. This includes budgeting, charitable giving, insurance, wealth transfer, and tax services. [3]

There are single-family offices and multi-family offices (MFOs). Single-family offices focus on one ultra-affluent family. MFOs are more similar to traditional private wealth management practices that serve multiple clients.

These highly experienced professionals can handle investments for wealthy individuals and families. Since family offices consolidate the operational risk and operational management into one channel, they are able to make better investment decisions that meet their family’s objectives. Some family offices focus on real estate investments—and for good reason.

Why Invest in Real Estate?

Real estate has always been a favorable territory for family offices. This type of investment provides a unique opportunity for family offices to maximize investment returns. Real estate properties, especially multifamily properties, provide a steady and long-term source of income for HNWIs. [4]

Real estate is a great way to accumulate wealth over time due to reliable cash flow. It is generally a safe investment, and family offices tend to leverage real estate to generate stable income.

Another major benefit of real estate investing is its appreciation predictability. It has less downside potential than other investments, making it a safe haven for capital.

Executed properly, real estate investments also provide tax-deferring benefits. This makes real estate even more attractive for family offices. [4]

Finally, real estate investing also allows for portfolio diversification. It is seen by investors as a valuable diversifier because of its limited correlation with equity markets. Having a real estate property in your portfolio of diversified assets can lower portfolio volatility, which reduces risk and provides higher returns.

What is Real Estate Syndication?

Real estate syndication is a partnership between several investors. They combine their resources and capital in order to purchase a property that they normally wouldn’t be able to afford. Multifamily real estate syndication is when investors put their resources together to buy a duplex, triplex, condominium, or any other property with multiple units that families can rent. Because tenants pay rent regularly, these properties tend to generate a continuous cash flow for investors. [5]

Multifamily properties are generally more expensive than other real estate investments. This is where syndication comes in.

Family offices can get into multifamily syndication in order to enjoy a safe and passive real estate investment.

In multifamily syndication, a sponsor or a syndicator locates the deal and looks for investors to participate in it. Most of the capital comes from the investors, who then earn from the cash flow and the equity upon resale.

Passive Real Estate Income for HNW Families

This type of real estate investment is ideal for family offices because HNWIs are busy individuals who typically do not have the time to manage properties and take on the role of a landlord. In a syndication deal, the sponsor takes charge of the property on behalf of the investors. The sponsor may also hire a third-party organization for property management.

The sponsor typically receives fees and/or a percentage of the “distributable cash” left after all the expenses and loan obligations have been paid. The syndicator also makes sure that the payment arrangements are understood by each investor.

The beauty of multifamily syndication is that investors get to enjoy the benefits that are usually afforded to the actual owner, including potential tax benefits and appreciation. Less Headache for Real Estate Investors: Choose Syndication

One common thread among those who are considered the richest people in the world is that they made real estate a core part of their investment strategy.

Multifamily syndication is a form of group investment, which means assets that are normally out of reach for the typical investor are accessible through it. But even HNWIs can benefit from syndication because it is a lot safer to participate in it than purchasing a real estate property on your own.

The sponsor or the syndicator—in this case, BAM Capital—will handle things like finding the right investment property for the multifamily syndication and looking for investors to complete the deal.

Why Work with BAM Capital for Multifamily Syndication

For family offices who want to try multifamily syndication, BAM Capital is the best option because of its vertical integration model that mitigates risk for investors.

BAM Capital prioritizes Class A multifamily properties because it values low-risk investments for passive investors. It also has a strong Midwest focus, prioritizing Class A, A-, and B++ multifamily real estate properties in that area. [6]

BAM Capital will arrange the syndication deal so there is no need to purchase an asset on your own. BAM Capital will also handle property management.

BAM Capital works with accredited investors and negotiates the purchasing and financing of high-quality multifamily real estate properties on their behalf. This Indianapolis-based company currently has $700M AUM and 5,000 units. Schedule a call with BAM Capital and invest today.

BAM Multifamily Growth & Income Fund III

BAM Capital created this fund in order to yield consistent and reliable cash flow, long-term appreciation, and accelerated tax benefits. The fund aligns with BAM Capital’s demonstrated track record of successful multifamily investing by continuing to implement our signature investment thesis, now in fund format. The fund aims for greater overall returns and lower risk through a multi-asset diversification strategy.

  • Consistent passive income
    Lower-risk assets with in-place cash flows with the ability to distribute preferred return after acquisition.
  • Significant tax benefits
    A cost segregation analysis allows for accelerated deprecation to years of ownership. This large passive loss gets passed onto investors through a K1.
  • Vertically integrated company
    In-house property management and construction allow for predictable cost reduction and value add.

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