It’s easy to think that lucrative real estate investments are only available to those who are extremely wealthy. However with the invention of REITs and Multifamily Syndication, real estate investing is within reach of more than just the top 1%.  Accredited investors are able to invest in commercial and residential real estate. And while it is still difficult to invest directly in large real estate deals, there are now more ways to get into real estate investing such as crowdfunding and syndication. 

Here we will be focusing on real estate syndication: how it works and how investors can find good real estate investment opportunities.

What is Real Estate Syndication?

Before discussing syndication opportunities and how to find them, let us first take a look at what this type of investment is and how it works.

Real estate syndication is an investment opportunity available to investors that are chosen by a syndicator, also known as a sponsor, who puts the deal together. In a syndication deal, a group of investors pool their resources together to purchase a single real estate asset that is usually too expensive for a single investor to buy. This is a good way for investors to acquire potentially lucrative real estate properties. [1]

Although different types of real estate can be used for syndication, multifamily syndication is often the most popular because renters provide continuous cash flow.

It is worth noting that syndication deals are mostly limited to accredited investors, meaning someone with a net worth that exceeds $1,000,000 or a yearly income of around $200,000. If they have a spouse, they need an annual income of at least $300,000. [2]

BAM Capital, for example, works only with accredited investors.

Is Multifamily Syndication Different from Crowdfunding Real Estate?

Real estate syndications are often confused with real estate crowdfunding. The latter became popular when the Jumpstart Our Business Startups (JOBS) Act was passed in 2012 and updated in 2016. Title III of the JOBS Act states that non-accredited investors can participate in real estate crowdfunding projects, with a cap on how much capital can be invested within a 12-month period. [1]

Real estate crowdfunding follows a simple philosophy that if many people invest a small amount, they can quickly raise enough money for ventures that are otherwise inaccessible to lone investors. It may use social media channels like Facebook, LinkedIn, and Twitter to reach potential investors. This opens up opportunities that may require a lot of capital. It allows investors to be shareholders in a real estate property. [3]

While the idea of real estate crowdfunding is similar with multifamily syndication, a syndication deal is put together by a sponsor who then locates investors to participate in it. Passive investors provide most of the capital and then the syndicator handles the property for the duration of the deal. On the other hand, crowdfunding in real estate attracts a wider array of investors, whether it’s through social media or social connections.

Both investment types allow investors to participate in real estate investing even with a lower investment size.

How to Find Profitable Real Estate Syndication Opportunities​

Real estate investors now have more freedom to choose investment opportunities to participate in, whether it’s syndication or crowdfunding. There are plenty of platforms online that investors should check out if they are interested in finding these opportunities. Some platforms cater only to accredited investors while others also work with non-accredited investors.

CrowdStreet, for example, is a  platform where investors may find crowdfunding or syndication deals, but they only cater to accredited investors.[1] 

Investors are encouraged to do their own due diligence when it comes to various platforms for real estate investment opportunities so they may find the one that best suits their needs and goals.

Some of these marketplaces vet investment opportunities ahead of time before they are made available to investors, which means they are perfect for finding syndication deals that are most likely to be profitable. However, using these platforms requires a lot of research on the part of the investors. There is no way to tell if the deal is actually good or bad, unless you know what you are doing.

If you are an accredited investor, you may be better off working with an actual syndicator that puts these deals together in the first place. Working with a trustworthy syndicator – like BAM Capital- with a proven track record for multifamily syndication is your best bet at finding profitable investment opportunities.

Is Real Estate Syndication a Good Financial Investment?

For accredited and experienced investors, real estate syndication offers a number of benefits that make it a great financial investment. It gives investors access to large and lucrative investment opportunities that may normally be out of reach. Multifamily properties, for example, are generally more expensive because of their size and number of units. But through a syndication deal, investors can purchase a multifamily property and get money from the continuous cash flow.

Investing in multifamily syndication also helps diversify your portfolio, which reduces risk by ensuring you don’t have all of your eggs in one basket. You can maximize your returns even if other investments perform poorly. Multifamily syndication is known as a safe investment because tenants generate cash flow, and even if a few tenants move out, the others will still cover the operating costs. It will generate profit in most cases. [4]

The best thing about real estate syndication is that it is a passive investment, meaning investors don’t have to take on the role of landlord. The syndicator is in charge of managing the property. This means passive investments in a syndication deal don’t have to worry about dealing with tenants, handling emergencies, etc.

Another reason why real estate syndication is a good financial investment is because of economies of scale. Large properties enjoy lower renovation costs and property management costs because contractors offer discounts per unit if there are a lot of units in a single property.

At the end of the day, a real estate syndication deal is only as good as the syndicator running it. Work with BAM Capital to find syndication opportunities that can be safe, passive and profitable.

Why HNW Choose Multifamily Syndication to Grow Their Wealth

In the financial industry, a high-net-worth individual or HNWI is someone who has liquid assets that go above a certain figure. Simply put, these are highly wealthy individuals.

Although there is no exact amount that determines if a person is wealthy enough to fit in this category, most HNWIs have at least $1 million in liquid financial assets. Their net worth typically exceeds seven figures. [5]

HNWIs usually come from rich families that have built their wealth across generations. When it comes to investment strategies, they generally prefer long term investments over short term ones. This is because their goal is to not just maintain their wealth but to grow it even further. They also understand the importance of surviving periodic financial or economic crises. [6]

Real estate syndication is ideal for HNWIs because it is a passive investment, and these are typically busy individuals who cannot take on the role of landlord. Since the syndicator is in charge of managing the property on behalf of investors, HNWIs don’t have to worry about it.

In a syndication deal, the passive investors often earn money from the cash flow as well as the equity upon resale once the deal is done, depending on the deal structure. The sponsor usually receives fees and/or a percentage of the “distributable cash” left after all the loan obligations and expenses are paid.

A lot of syndications are structured with a preferred return, meaning investors need to get a minimum return on their investment before the sponsor can get a share of the cash flow. So if the preferred return is set at 7%, then any return up to 7% needs to be distributed to the investors. This preferred return rate is called the threshold. Upon meeting this threshold, the sponsor would begin to receive a portion of the cash flow. However, different syndication deals may have different ways of splitting distributions after meeting the threshold. [7]

The investor does not have to be involved with any of the property management. The fact that it is a passive investment makes it appealing to a lot of investors, including high-net-worth individuals. Also, by choosing the right syndicator, HNWIs can be selective of the properties they are investing in. This is a significant advantage over something like real estate investment trusts or REITs where it is more of a blind fund. [7]

Real estate syndication gives investors the benefits of owning real estate without the responsibilities that usually go with it. It even has a few unique tax benefits.

Tax Benefits of Multifamily Syndication

Real estate tax deductions are passed on to the investors when they put money into a syndication deal. This creates a tax-sheltered environment where investors can compound their money for years without paying taxes until the property is sold. In fact, a property can easily show a loss for tax purposes because of depreciation and interest payments, even though it is generating a positive cash flow. So when you join a multifamily syndication, you get to enjoy the benefits that are usually afforded to the actual owner- without having to run a real estate company yourself.

Syndication can be attractive to investors because of its passive nature. If you want to generate passive income through real estate, this could be the best way to go. But the tax benefits are also incredibly appealing to a lot of investors.

Passive income through real estate syndication is subject to marginal tax rate. However, significant portions of the income can be sheltered through deductions. This means there is a lower effective tax rate because the marginal tax rate is only applied to a smaller portion of your passive income instead of the majority of earned income. [8]

Investors in a syndication deal can even write off a portion of their income to account for the natural deterioration of the property. The 2017 Tax Cuts and JOBS Act makes it easier for investors to claim depreciation so they can front-load the deductions instead of claiming them throughout the property’s lifespan. This is perfect for syndication investors because they will only own the property for 5 to 10 years before the syndication is terminated by the sale of the property.

Because of its tax benefits, real estate syndication is a great choice for investors who want to try real estate investing.

Why Choose BAM Capital for Your Next Syndication Opportunity​

You don’t need to go out there and look for syndication opportunities on your own. You can work with BAM Capital if you are an accredited investor and we will negotiate the purchasing and financing of high quality multifamily real estate properties on your behalf.

This Indianapolis-based company currently has over $700 million AUM and 5,000+ units. BAM Capital has a strong Midwest focus, prioritizing Class A, A-, and B++ multifamily properties because they offer the lowest risk for BAM Capital’s investors. [9]

As an investor looking into real estate investing, there is no need to purchase an asset on your own. BAM Capital will arrange the syndication deal and also handle property management.

Our investors love the low-risk investment approach offered by BAM Capital. Investors can pool their resources and get money from the cash flow and equity once the deal is done.  Investors can enjoy BAM Capital’s low-risk investment strategy that creates forced appreciation. BAM’s vertical integration model also mitigates investor risk. [9]

Schedule a call with BAM Capital and invest today.

Sources:

[1]: https://hudsonpoint.com/learning-center/blog/how-to-find-good-real-estate-syndication-opportunities/

[2]: https://www.forbes.com/sites/forbesbizcouncil/2021/10/26/a-guide-to-investing-in-real-estate-syndications/?sh=cdcea5e538cf

[3]: https://www.investopedia.com/ask/answers/100214/what-real-estate-crowdfunding.asp

[4]: https://thinkrealty.com/9-reasons-invest-real-estate-syndication/

[5]: https://www.investopedia.com/terms/h/hnwi.asp

[6]: https://wealthmanagement.bnpparibas/en/expert-voices/key-trends-investments-strategies-family-offices.html

[7]: https://www.millionacres.com/real-estate-basics/real-estate-terms/investing-multifamily-syndication/

[8]:https://lifebridgecapital.com/2021/03/18/real-estate-syndication-tax-benefits/#:~:text=Syndications%20also%20offer%20many%20tax,and%20greatly%20reduce%20taxes%20owed

[9]: https://capital.thebamcompanies.com/