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Vertically Integrated Multifamily Real Estate Company

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A vertically integrated company is one that takes direct ownership of various stages of its production in order to streamline its operations. Instead of outsourcing and relying on external contractors or suppliers, these companies acquire their own suppliers, distributors, manufacturers, etc.

It can be risky for a company to start vertical integration because of its significant capital investment. But for companies like BAM Capital, which has already achieved vertical integration successfully, their clients can enjoy all the benefits that this provides.

This article will explain how vertical integration works and what this means for a multifamily real estate company. We will also discuss why BAM’s vertically integrated real estate model generates great returns.

Real Estate Investing: What Does It Mean To Be Vertically Integrated?

Usually, a company only handles a single point in the manufacturing process. But if the organization wishes to be more self-reliant, it can start taking on other aspects of this process. This is what vertical integration is. [1]

In order to practice vertical integration, a company may start directly sourcing its own raw materials, for example. They may also begin to distribute their own products and sell to their consumers rather than hiring a third party organization to do it for them.

A company can use vertical integration to broaden its footprint across the supply chain or manufacturing process.

In terms of real world companies, Netflix, Inc. is a good example of vertical integration. While it began as an online streaming platform for films and TV shows, it now produces its own original content to increase their profits and strengthen the Netflix brand.

By performing vertical integration, Netflix no longer fully relies on the content of other production companies and major studios, although it is still a major part of their streaming service. [1]

As for vertical integration in real estate investing, BAM Capital is the perfect example. BAM Capital handles all steps of the investment life cycle, from purchasing to remodeling, to management, yielding a higher return for investors by streamlining its operations.

A company needs to have direct ownership of suppliers, distributors, and retailers in order to have vertical integration. With greater control over its supply chain, the company enjoys reduced costs and greater efficiency. [1]

The supply chain typically begins with the purchase of raw materials from a supplier. It then ends with the sale of the final product to the customer. There are plenty of steps along the way, including manufacturing, distribution, marketing, etc. The company works with suppliers who provide these services. But with vertical integration, you can own the supply chain by taking control of some or all of these steps.

Doing this is no easy feat. The company needs to find a way to successfully purchase or recreate that part of production, distribution, or retail. This makes them self-sufficient as they no longer have to outsource that step, which also reduces manufacturing costs. [1]

Vertical integration is a costly process that requires a substantial investment. Not all companies can do it successfully like BAM Capital. Clients get to enjoy the benefits of this streamlined process as well, because it means they only have to work with the vertically integrated real estate company and know that they are in the right hands.

Vertical integration tends to increase the size of the company’s operations, meaning it also gets more complex.

Types of Vertical Integration

There are three types of vertical integration: forward integration, backward integration, and balanced integration. The first two are the most common.

These types simply refer to the manner in which a company acquires the other steps of the manufacturing process. If a company acquires a supplier that is further along in the supply chain, this is called forward integration. If a company acquires a vendor that is prior to it along the supply chain, this is called backward integration. [1]

Balanced integration is when a company attempts to achieve both at the same time, by merging with companies that come before and after it in the supply chain. To achieve this, the company has to be “the middleman” in the first place. A balanced integration is costlier, but it gives the company the greatest potential upside as it can take over the entire supply chain.

Benefits of Vertical Integration for a Multifamily Real Estate Company

A real estate investment company can benefit from vertical integration in a number of ways. For starters, a company like BAM Capital that can handle the complexity of vertically integrated real estate can be considered an expert in its field.

A vertically integrated real estate company has an unmatched level of domain expertise. This means BAM Capital also has an incredible understanding of the real estate market and best practices. BAM Capital clients can therefore enjoy the benefit of working with an industry expert that can offer the best real estate investments for accredited investors.

A real estate company that is vertically integrated has far more industry knowledge and experience compared to one that only handles one part of the supply chain such as acquiring commercial properties. [2]

BAM Capital handles everything involved in the investment life cycle, from purchasing to property management. This level of involvement has given BAM the expertise necessary to identify and acquire only the best multifamily properties for their investors. Since BAM also handles things like remodeling and construction, this saves and generates a lot more money for its investors. Vertical integration can maximize the returns for investors.

A vertically integrated real estate company can also make more deals viable. With its own construction unit, a vertically integrated company can pursue projects that other companies cannot, and they can do so with the confidence that their construction unit is operating with their interests in mind. [2]

Real estate companies that only outsource certain jobs do not have this same reassurance; therefore certain projects are not as viable for them. They will have to look for a third party company to rebuild investment properties to bring it up to rent-worthy condition. It would require more preparation, planning, and money to make the project work for them. [2]

Overall, vertical integration helps generate greater returns for the company’s investors.

Finally, a vertically integrated company also benefits from economies of scale. When a company increases its level of output, it can give them proportionate cost advantages.

For example, BAM Capital is a vertically integrated real estate company specializing in multifamily properties in the Midwest. This means that the company knows everything there is to know about properties in that area, including market values and the most cost-effective ways to develop such properties. BAM Capital has already established expertise when it comes to Class A, A-, and B++ properties in this area, making them the go-to company for accredited investors looking for multifamily assets and real estate syndication deals.

Performed well, vertical integration will give a company greater control over the supply chain, which will lead to lower reliance on external parties and lower costs.

While it’s true that the company will have to take on more responsibilities as they take control of the supply chain, it will also lead to faster turnaround times. If the whole process is done by a single company in-house, then this also means simpler logistics. Despite having more things to manage, the company will be able to get everything in proper order because all steps of the manufacturing process are perfectly aligned. [2]

Keep in mind that vertical integration is a long and difficult process. It cannot be achieved overnight. The company will have to buy into the entire manufacturing process. This means they have to spend on new systems, new equipment, staff training, etc. [2]

Any company that manages to implement vertical integration while narrowing its focus on its area of expertise will be able to develop effective processes that push them toward their long term goals.

BAM Construction

The BAM Companies, formerly known as Barratt Asset Management, is one of the best examples of a vertically integrated company in real estate. It specializes in the acquisition and management of multifamily properties, particularly apartment communities. [3]

It is headquartered in Indianapolis, Indiana and consists of BAM Capital, BAM Management, and its latest addition, BAM Construction.

The BAM Companies has successfully implemented vertical integration. Now it is able to utilize its market expertise, as well as the knowledge and strengths of its employees, to achieve maximum benefit for community residents and investors alike. [3]

BAM Construction was added in 2015, providing upgrades to features and amenities, and officially completing the vertical integration process for The BAM Companies. This means The BAM Companies can now cover every part of the real estate investing process from start to finish. All clients have to do is participate.

BAM Management

Meanwhile, BAM Management specializes in the acquisition and management of multifamily apartment communities.

BAM Management hires local talent with market expertise, which benefits investors and residents alike. BAM Management began in 2010 but quickly grew into one of the best real estate management companies in the country. It went from managing a few small properties to taking on more than $700 million in total assets.

For a company that offers multifamily syndication deals, having a management company is a huge advantage. This is because syndication deals are designed to be passive investments wherein investors do not have to play the role of landlord. The responsibility of managing the apartment complex usually falls on the syndicator, who either hires a third party property management company or handles it themselves.

With BAM Management, The BAM Companies ensures that the investment properties are properly handled so that they are always in top condition. BAM Management keeps an attentive and experienced staff from the front desk to the maintenance teams. They will take care of the residents and make sure they have a pleasant experience.

BAM Management also makes it as easy as possible for tenants to submit repair requests, ask questions, and pay rent with the help of on-site staff or through the use of the latest technology.

As a whole, The BAM Companies only manages communities that it is proud of. This is why even staff choose to live at these locations simply because of the convenient locations, the amazing amenities, and the incredible value for their money.

BAM Capital

BAM Capital is the private equity arm of The BAM Companies, which is an institutional real estate owner/operator.

BAM Capital works with accredited investors, giving them access to premier real estate investing opportunities through multifamily real estate syndication deals. BAM Capital offers transparent stewardship of capital, as well as a means to achieve portfolio diversification.

By investing with BAM Capital, accredited investors are able to enjoy tax advantages, plus the ability to build long-term wealth.

Why Our Model Works So Well

There are several reasons why The BAM Companies model works so well and vertical integration is a huge part of it. The BAM Companies invested in launching all three companies and making sure each of them was successful enough to stand on its own. This is why BAM Capital, BAM Management, and BAM Construction all work so well together as one giant real estate operation.

From upgrading amenities to finding the best multifamily assets to managing properties and giving tenants a one-of-a-kind experience, The BAM Companies can provide it all. But its success is not merely because it is a vertically integrated company.

BAM Capital prioritizes Class B++, A-, and A multifamily assets with in-place cash flow and proven upside potential to make sure investors can make a profit out of their investment. This strategy mitigates investor risk. It also allows the fund to target consistent monthly cash flow.

As previously mentioned, vertical integration comes with the added benefit of establishing local expertise, which The BAM Companies has also achieved thanks to its strong Midwest focus. BAM Capital leverages local expertise and long-standing relationships with real estate developers, brokers, sellers, and builders to give them expert knowledge on assets being purchased.

BAM Capital has unmatched expertise thanks to its vertical integration and transparency.

Why Work with BAM Capital

As a whole, real estate is a great asset class to invest in. There are also many ways to participate. You can go for a commercial real estate investment, a residential real estate property, or even vacant land. But for accredited investors, there is another viable option and that is multifamily real estate syndication.

In a syndication deal, multiple investors pool their resources together in order to purchase a single real estate property. This is arranged by a syndicator: in this case, BAM Capital.

BAM Capital has you covered from start to finish: from locating the multifamily real estate property, to putting the deal together, to managing the property. For investors who want to enjoy all the benefits of owning multifamily real estate without the headaches of being a landlord, a syndication deal is the ideal investment. [4]

BAM Capital negotiates the purchasing and financing of high quality real estate on behalf of their investors. It is known for its award-winning multifamily investment strategy that creates forced appreciation. In fact, BAM Capital now has over $700 million dollars in assets under management (AUM) and 5,000+ units. [4]

No investment is without risk. Make sure to consult your investment advisor or speak to a BAM Capital investment team member before making any financial decisions. Accredited investors can 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.  

BAM MULTIFAMILY GROWTH & INCOME
FUND III OFFERING MEMORANDUM

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What is an accredited investor? Have earned upward of $200,000 (or more than $300,000 if jointly paired with a spouse) for each of the last two consecutive years & expect to earn the same in the current year. Possess a net worth of more than $1 million (either individually or in partnership with one’s spouse), not including the value of their primary residence.
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