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What is a Family Office? BAM Capital Real Estate Investing

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A family office serves as a private wealth management firm for high net worth individuals also known as HNWIs. But, unlike traditional wealth management shops, a family office provides investment management, tax and estate planning, and other financial services for a specific wealthy family or individual.

These affluent families may require family office services for the purpose of managing family wealth or handling their financial assets. A dedicated family office focuses on a single family or family business. HNWIs that run multiple businesses and own several properties may need a family office to keep everything organized.

In general, a family office provides a spectrum of private wealth management services to a small number of high net worth families. The traditional family office helps with budgeting, insurance, wealth transfer, charitable giving, and tax services.

What is a Family Office?

A family office can offer a wide range of financial services tailored to meet the needs of HNWI family members. There are two types of family offices: single family offices and multi family offices.

As the name implies, a single family office serves one individual and their family. On the other hand a multi family office serves a few families.

Family office staff can help with investment strategy, investment management, charitable giving, tax planning, etc. These are just a few examples of the services offered by a family office. Aside from handling investments, they can also help manage the financial aspects of a family owned business. [1]

HNWIs are often too busy to manage family financial matters, especially if they have had tremendous financial success. They need all the help they can get when it comes to managing family wealth and maintaining the family enterprise.

Family businesses may also need structures for succession planning. They may have to set up trusts or a foundation for their assets. Because these situations are naturally complex, family office services may be necessary. A family office can help with most family financial matters. [1]

Other family offices even handle non-financial issues like travel arrangements, household arrangements, and private schooling.

Family offices may vary in terms of the type of services they provide. It mostly depends on what their client needs. While one client may need help with their family business, another may require help with their lifestyle needs.

What Does a Family Office Do?

Ultra-wealthy families have comprehensive wealth management needs that go beyond the capacity of a single professional advisor. What they need is a family office structure—not just management teams, but an organization that consists of well-coordinated professionals.

For some families a small family office is enough, but others require professionals from different industries including legal, investment, insurance, estate, business, and tax disciplines. [1]

An outsourced family office provides a higher level of financial planning that uses an integrative approach. This “integrative approach” combines cash management, asset management, risk assessment, financial planning, and lifestyle management, among other services. [1]

Family offices provide family governance advice, tax and estate planning, charitable giving, investment management services, etc. Even if a wealthy family takes risks with their investments, they can make smarter decisions with the guidance of their family office and its financial experts.

Such an organization can also help with lifestyle management such as making sure that family members do not overspend their assets. A family office can act as a personal concierge and make sure that their finances are properly managed so it will match their lifestyle needs. [1]

A family office can help HNWIs with their long term financial goals so they could properly handle their family assets and focus on accumulating wealth.

Benefits of Investing in Multifamily Real Estate for Family Offices

Most HNWIs are looking for investment opportunities that will allow them to grow their wealth even further. For most family offices, multifamily real estate properties remain the preferred investment type. This is because of the growing need for housing in the United States. People are always in need of a place to live, and multifamily properties provide that. [2]

The need for housing has put a spotlight on multifamily residential real estate as the prime option for investment, especially for HNWIs.

A multifamily property is a real estate asset that contains more than one unit. Unlike single family properties, multiple units can be rented by different families. Examples of multifamily real estate include duplexes, triplexes, apartment complexes, and condominiums. Multifamily offices should look into this type of real estate investment because it offers several benefits for wealthy investors. [2]

The primary benefit of multifamily real estate investing is that it is a reliable source of income. These properties provide strong cash flow through rental income. A family office can enjoy greater cash flow from a large multifamily property than with a single family property that only has one tenant.

Due to the higher number of units and tenants, investors can worry less about vacancies. Multifamily real estate properties are generally associated with lower risk. One or two vacancies will not disrupt your cash flow because you can still earn money from your remaining tenants. On the other hand, a single family property will stop generating income if it becomes vacant. [2]

Multifamily properties are known as the best and most affordable housing option for a lot of families. Apartment buildings and condominiums are always in high demand. If a property is in a good location, it can expect high occupancy rates. This means investors can enjoy lower vacancy rates, and higher revenue. Overall, this is a low risk investment. [3]

Multifamily real estate also allows investors to manage more assets with less of their own capital. It is easier to secure financing for a multifamily property such as an apartment complex than it is to secure multiple loans for separate single family units in different locations. Banks are more likely to approve a loan for a multifamily property because they know that these properties generate a stable and reliable cash flow through monthly rent.

Looking at it from a per-unit basis, multifamily real estate properties are actually more affordable than other property types. Although it will cost more to acquire, this is also the more cost-efficient investment strategy. Not to mention that for HNWIs and wealthy families, the acquisition cost is not a big obstacle. If you decide to go for a mortgage loan to either purchase or build this type of property, you can expect lower mortgage financing rates. [3]

Finally, you and your family can also enjoy tax breaks and other tax benefits when you invest in multifamily real estate. The government will reward you for providing housing for the residents of a given city through tax incentives. [3]

For family offices that are looking to diversify their real estate investment portfolio, multifamily real estate is a great option.

Why High-Net-Worth Family Members Are Investing in Multifamily Real Estate

Because multifamily properties are safe, reliable, and profitable, they are particularly attractive for family offices and HNWIs. Compared to other property types, they offer high risk-adjusted returns over the long term. [2]

These real estate investments can help ultra-high net worth families maintain their wealth for generations.

When it comes to investment preferences, family offices are influenced by geographic factors, asset allocation, origin of wealth, and other factors. Research suggests that 56% of family offices invest directly, while 81% invest in private equity. 65% 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]

Multifamily real estate may be the right investment opportunity for family offices. Given its cash flow, diversification, and long-term capital appreciation, this is exactly the type of investment that HNWIs usually go for.

The only thing that investors should know about is that managing a large multifamily property may be difficult especially for those who have no experience when it comes to being a landlord. Owning and managing a multifamily real estate property comes with a lot of responsibilities. This is why a lot of family offices hire property management companies that can handle the day to day needs of the property, including repairs, maintenance, emergencies, and managing tenants. The strong cash flow from multifamily real estate can typically cover these additional expenses.

Why Family Offices are investing with BAM Capital

A lot of family offices have discovered a much easier way to invest in multifamily real estate. With multifamily syndication, investors no longer need to look for an investment property, handle the financing, and manage the apartment building all on their own.

A syndication deal is a real estate investment that involves multiple investors pooling their resources together to purchase a single real estate asset. This can be done with any type of real estate, but multifamily syndication is the most popular because of its strong cash flow and other benefits. [4]

A syndicator or primary sponsor puts the deal together. They locate the property, coordinate the transaction, secure the loan, and look for passive investors to participate in the syndication.

Passive investors can join and supply a portion of the capital needed to acquire the property. They then earn money from the monthly cash flow as well as the equity upon resale. [4]

The syndicator is also in charge of property management, making this a real passive investment. Family offices do not have to worry about finding the most profitable multifamily property in the market. They also don’t need to hire a property management company or play the role of landlord. This is all done by the syndicator.

If your family office is interested in investing in multifamily syndication, BAM Capital is the best syndicator for the job. BAM Capital is an Indianapolis-based syndicator with a strong Midwest focus.

This syndicator prioritizes B++, A-, and A+ multifamily assets with in-place cash flow and proven upside potential. [5]

With its unmatched real estate expertise and transparency, BAM Capital mitigates investor risk and creates forced appreciation to yield a higher return. BAM Capital locates 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 family offices.

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.  

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