Family Office Multifamily Real Estate Investing

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A family office is a private advisory firm that serves high-net-worth individuals (HNWIs) and helps manage their wealth. Unlike traditional wealth management shops, family offices provide a completely outsourced financial and investment solution for the family or individual.

Family offices offer a broad spectrum of private wealth management services such as insurance, budgeting, wealth transfer, charitable giving, and tax services. There are two types of family offices: single-family and multi-family offices (MFOs). Multi-family offices serve a few families while single-family offices serve only one. [1]

Some HNWIs may require their aid in order to set up trusts or create a foundation for the family assets. The complexity of these tasks usually makes professional assistance necessary. But family offices can also help with certain non-financial issues such as travel arrangements, household arrangements, and private schooling. The services offered by family offices may vary.

More and more family offices are beginning to invest in multifamily real estate, and here we will discuss why. This guide may help HNW investors see the benefits of multifamily real estate investing.

Benefits of Investing in Multifamily Real Estate for Family Offices

Multifamily properties remain the preferred property type for most family offices. Many HNWIs are looking for new investment opportunities, and the growing need for housing in the US has placed a spotlight on multifamily residential properties as the prime investment option. This is why family offices are always on the lookout for amazing real estate investment opportunities. [2]

Multifamily properties are real estate assets that have more than one unit that can be rented by different families. Duplexes, triplexes, apartment complexes, and condominiums all fall under this category. Investing in these multifamily assets can offer several benefits for investors.

They provide plenty of cash flow and tax benefits, allowing investors to build long-term wealth through a consistent monthly income. Because of the higher cash flow, multifamily units are associated with lower risk. You do not have to worry about vacancies since it will not disrupt your cash flow as much as it would if you owned a single family real estate property. [2]

Through multifamily real estate, investors can also manage more assets even with less of their own capital. It is also much easier to finance and manage a multifamily property than multiple single-family units in different locations.

It is the perfect investment for those who are not interested in retail, office space, hotels, or other properties. Multifamily residential real estate is a solid investment for family offices and HNWIs.

Why High-Net-Worth Families Are Investing in Multifamily Real Estate

Multifamily residential properties are the most attractive real estate investment for family offices because they are safe and profitable. Compared to other property types, they offer high risk-adjusted returns over the long term. [2]

By placing their wealth into safe real estate investments, these families are able to maintain their wealth for generations.

The pandemic has caused banks to pull back on lending for a lot of early development projects. Family offices are helping to bridge that gap through their real estate investments.

Investment preferences of family offices are influenced by several factors including geographic location, asset allocation, and even origin of wealth.  Research suggests that 56% of family offices invest directly, while 81% invest in private equity. Sixty-five percent invest in real estate, and 41% invest in venture capital. Data also shows that 19% of family offices built their wealth through real estate. [2]

Family offices are always looking for great investment opportunities, and multifamily real estate is an attractive investment because of its cash flow, diversification, and long-term capital appreciation. HNWIs appreciate having a stable and assured income.

Why Invest in Real Estate?

Real estate investing comes with numerous benefits. With the right assets, family offices can enjoy a stable and predictable cash flow plus excellent returns and tax advantages. Done properly, real estate can help investors maintain and build wealth.

A real estate investor can make money through appreciation and profits generated by business activities that depend on the property. But most of the income will be generated through rental income. The more units are in a multifamily property, the more rent you can collect.

Even if one or two units become vacant, investors don’t have to worry about cash flow because other units will keep on generating income. Compare this with a single-unit real estate property that completely stops generating income the moment it becomes vacant.

Multifamily real estate investing is also beneficial because of its many tax breaks and deductions. Investors can save money by deducting the costs of owning, operating, and managing a property. [3]

Another benefit of multifamily real estate investing is the ability to turn a profit through appreciation. Real estate values can increase over time, especially with a good real estate investment property. This leads to a higher cash flow and a bigger profit once it is time to sell. [3]

Real estate properties also have potential for diversification. This is because real estate properties have a low correlation with other asset classes. You can lower portfolio volatility and enjoy a higher return per unit.

Why Invest in Apartment Complexes?

There are many different kinds of real estate assets that can be considered multifamily properties. But apartment complexes are some of the most lucrative and it’s all thanks to the number of units available. While it varies significantly from one apartment to another, the multiple units provide a consistent cash flow for its investors.

Because everyone needs a place to live, there is always a demand for apartment complexes. Well-located apartments with plenty of amenities are usually in demand and are rarely vacant. Apartment complexes also tend to be more affordable for renters compared to condominiums. This is why apartments are the top choice for many singles, families, young professionals, and students. Apartment complexes are also popular among the low-income workforce. [4]

Apartment investing tends to be less risky than other asset classes. Just like with other multifamily properties, investors get to enjoy numerous tax advantages. You can use various strategies to minimize your tax obligation such as cost segregation and accelerated depreciation. Family offices can help HNWIs decrease the amount of taxable income so that they can enjoy more profit. [4]

Apartment complexes are usually difficult to manage, especially for first time investors. Having multiple units means that investors have to work hard as a landlord to keep up with tenant needs, emergencies, repairs, maintenance, and other concerns. But for family offices, this is not as big of a problem.

HNWIs have the budget to hire a property management company to handle the apartment’s day-to-day needs. This is another reason why family offices should consider investing in apartment complexes. It can serve as a passive investment for HNW families looking for a safe and profitable real estate investment.

Should HNW Families Create their Own Management Company?

Many wealthy families ask themselves whether or not they should create a family office to manage their wealth and investments. The truth is that not all families need a wealth manager. For some families, a Chief Investment Officer (CIO) is enough to manage their investments. This is why the CIO is usually the first to be hired by HNWIs. [5]

Larger family offices will have a CIO, a CEO, a few investment teams, and operations professionals who focus on investment implementation, trading, and reporting. One benefit of having a family office is that it lets the family choose what services they require. This creates a highly personalized experience.

Every family office is different. There is a popular phrase in the industry that alludes to this: “If you’ve seen one family office, you’ve seen one family office.”

This is because each family has different assets, investments, and financial goals. So the question is who should consider creating a family office? There are several factors to consider such as asset levels, services needed, and the importance of such services. Creating a family office and maintaining it is also an investment. You need to make sure you have successors who will continue to oversee it.

You also have to consider how much you are willing to spend to receive the services you need. If these services are important to your long term financial goals, then you should consider spending money on building your own family office. This may take a sizable percentage of your assets in order to start a family office and enjoy its services, so make sure it is part of your long term strategy for building a sustainable business and maintaining your wealth. [5]

Why Family Offices are investing with BAM Capital

Family offices have discovered that there is a much easier way to invest in multifamily real estate and it is through multifamily syndication.

Multifamily syndication is a type of real estate investment that involves multiple investors pooling their resources together in order to purchase a single real estate asset. [6]

While syndication can be done with any real estate property, multifamily property syndication is the most popular, given all the benefits mentioned above.

In a syndication deal, there is a sponsor or syndicator that puts the deal together, locates the property, and coordinates the transaction and financing. They will then look for passive real estate investors to participate in the syndication. Passive investors supply most of the capital required in exchange for equity in the real estate. [6]

BAM Capital is an Indianapolis-based syndicator with a strong Midwest focus. When it comes to multifamily real estate investment properties, BAM Capital prioritizes B++, A-, and A+ multifamily assets with in-place cash flow and proven upside potential. [7]

This syndicator mitigates investor risk with its unmatched real estate expertise, vertical integration, and transparency. BAM Capital handles the process of finding high-quality real estate opportunities and negotiates the purchasing and financing on your behalf. They take care of everything from start to finish, making it a true passive investment for HNWIs.

Another benefit of multifamily syndication is that the syndicator is in charge of property management. Investors do not have to take on the role of landlord while participating in a syndication deal. BAM Capital also uses forced appreciation to yield a higher return for investors. [7]

BAM Capital has a consistent track record that makes them very popular among passive investors. In fact, they currently have $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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The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.