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Multifamily Syndication vs. Owning an Apartment Complex Yourself

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Most investors know that real estate investing can be a lucrative endeavor. One of the best things about real estate is that there are many different ways to invest in it. Some people buy and flip houses, while others purchase commercial real estate. But apartment buildings have always been known for their wealth-building potential.

Apartment complex investing is a time-tested way to build wealth, so a lot of high net worth individuals (HNWIs) take interest in this investment opportunity.

Multifamily investing comes with an array of benefits, including a strong and reliable cash flow, as well as incredible tax benefits. However, owning an apartment complex and managing it is easier said than done. As an investor, you have to put in a lot of work to make sure your properties can turn a profit.

Here we will talk about the benefits of owning multifamily properties, and an alternative investment strategy for accredited investors.

Should HNW Investors Buy Their Own Apartment Complex or Let the Pros Do It for Them?

Apartment buildings are definitely great assets to own. However, this does not mean it is a good idea for everyone. Apartment owners and investors need to have a certain level of risk tolerance and a willingness to put in a lot of time and work into making their property profitable. Not everyone has the time or the patience to own and run an apartment building.

Don’t let this discourage you from purchasing a multifamily real estate property if that’s what you really want to do. But if you are a high net worth individual or accredited investor, you should hear about real estate syndication and its benefits. We will discuss this later on, but let us first take a look at why owning a multifamily rental property is a good choice for some individuals.

Benefits of Owning an Apartment Complex

Owning an apartment building can offer a wide variety of benefits. Multifamily properties generate a strong and consistent cash flow thanks to their multiple units. You do not have to worry about vacancies affecting your cash flow because the occupied units will keep on generating income. If your property is well-located, you can easily find new tenants and maximize your profits.

Generally speaking, the cash flow from dividend stocks and annuities cannot compare to the amount generated by apartment buildings on a regular basis. [1]

But cash flow is not the only thing you can get from owning multifamily properties. You also get to enjoy a lot of leverage. Apartments allow borrowers to put down around 20% to 30% of the sale price while financing the rest over an amortization period of 25 to 30 years. [1]

Owning an apartment complex also gives you tax benefits. This is what makes it an ideal investment. Investors can take substantial deductions via mortgage interest and depreciation. In fact, other expenses like utility and travel costs can also be deducted.

Multifamily properties can build up equity over time as the mortgage is paid off. Plus, if the property itself increases in value, then investors can also expect equity growth.

Investors can even earn additional income by adding laundry machines, parking spots for non-residents, and vending machines to the property. These are some of the most common supplemental income sources for landlords. [1]

The Challenges of Owning an Apartment Complex

While owning a multifamily real estate property definitely comes with plenty of advantages, there are also some challenges that you need to know about.

For starters, owning an apartment complex takes a lot of work. It is a huge time investment on your part just to keep it running. You have to select a multifamily property to purchase, then you have to finance and purchase it, then you have to do a lot more work to get it running. Maintaining the property is also a huge commitment because you have to handle tenant issues, manage the property, collect rent, pay for repairs, and deal with emergencies. [1]

You have the option of hiring a property management company to take care of the day-to-day responsibilities of being a landlord, but you still have to take the time to supervise the management company and make sure the property remains profitable.

Repairs and maintenance could be pricey: replacing broken windows, fixing light bulbs, etc.–all of these come at the expense of the landlord. Insurance can help you cover larger items, but everything else needs to be paid for out-of-pocket.

Overall, owning a multifamily real estate property is an expensive ordeal. On top of that, you have to work with the fact that apartment complexes have low liquidity. You can’t easily sell apartment buildings and get your money back, unlike with stocks and bonds. You might not even get the price you want. It may take several months to sell your multifamily property. [1]

You also have to think about local market factors that may influence your property’s value unexpectedly. For example, the neighborhood may see an increase in crime and poverty, which will lead to a decline in the value of your investment property.

Finally, you may also be exposed to certain liabilities as a landlord. Property owners always have a robust insurance policy, but they could still be held liable for accidents or crimes that occur on the property. Comparable investments like stocks and bonds do not have this type of risk. [1]

Fortunately for HNWIs and accredited investors, there is another option that mostly eliminates the usual challenges associated with apartment complex investing. This is where real estate syndication comes in.

Benefits of Real Estate Syndication

A real estate syndication deal is a group investment. A syndication deal is when multiple real estate investors pool their resources together to purchase a single property. Because of this setup, investors are able to purchase larger properties that they normally would not be able to purchase on their own.

Real estate syndication deals are arranged by syndicators who serve as General Partners in the deal. They locate the real estate property and then find investors who will provide most of the capital needed to purchase it. These investors will be the Limited Partners.

A syndication deal can be done for almost any type of real estate property, but multifamily properties are ideal due to the benefits mentioned above. They have great cash flow, they don’t worry as much about vacancies, etc.

While there are people who can afford to buy a $3 million apartment building on their own, this isn’t always the investment approach investors want to take. [2]

Multifamily real estate syndication is popular for a reason. Aside from the strong and consistent cash flow, multifamily syndication comes with a great benefit that you don’t get to enjoy if you are purchasing a property yourself. That is the fact that syndication is a completely passive investment.

The syndicator takes care of property management, meaning you do not have to worry about it. Passive investors can invest in a lucrative multifamily property without having to become a landlord.

In a syndication deal, you are basically allowing the professionals to run the apartment complex for you. You can just sit back, relax, and enjoy all the benefits of your investment. You can focus on more important tasks like running your business, managing your other investments, etc. As a passive investment, this is much less time-consuming than other investments.

The syndicator or sponsor will handle everything, from locating and evaluating the real estate property, to running it and making sure it is profitable. [2]

Multifamily syndications are legally formed as LLCs (Limited Liability Companies) or LPs (Limited Partnerships).

There are many types of real estate investments that you can potentially get into, but not all of them enjoy the low risk, high reward offered by multifamily syndication. Because you are pooling money with other investors, you are only liable for losses that are equivalent to what you invested. In the event that the investment does not work out, you do not have to bear the load of all the losses–which is what would happen if you were the sole owner of the property. [2]

Aside from that, multifamily syndication enjoys a lowered risk in general. You get to have diversification among more asset classes, plus you get to work with real estate experts that know all about ideal locations and deals.

Multifamily Syndicators Have Experience in Real Estate Investing

Multifamily syndication takes a lot of the good qualities you get from owning an apartment complex, eliminates some of its biggest challenges, and adds some more benefits for investors. For example, it removes the financial hurdle of having to purchase an entire apartment building by yourself. This is no longer a problem since multiple investors are pooling their resources together. You can participate in real estate investment opportunities that you normally wouldn’t go for because it is too expensive or impractical.

On top of this, you get to work with experienced syndicators who know a lot about real estate investing. The devil is in the details after all. Working with a high quality syndicator like BAM Capital will allow you to get into the best real estate syndication deals out there. They will handle everything from start to finish so you can just sit back and let your money work for you.

They Know How to Buy the Right Multifamily Properties

BAM Capital understands local market conditions and other important factors that affect real estate syndication deals. In fact, these real estate experts do all the work for accredited investors from locating the best real estate properties to performing due diligence. They will handle all the difficult issues while you sleep.

Experts also make sure you are informed about all developments regarding your real estate syndication property. They can find the best real estate opportunities in any environment and create exceptional value.

BAM Capital in particular has a strong Midwest focus and prioritizes B++, A-, and A multifamily assets with in-place cash flow and proven upside potential. This strategy mitigates risk for their investors and allows the fund to target consistent monthly cash flow. [3]

They Are Vertically Integrated with Their Own Builders

Vertical integration is when a company takes direct ownership of the various stages of its production rather than relying on external suppliers and contractors. This allows them to streamline their operations. [4]

In the world of real estate investing, a vertically integrated company such as BAM Capital handles all steps of the investment life cycle, from purchasing to remodeling to management. This yields a higher return for investors.

Thanks to its vertical integration, BAM Capital can offer unmatched expertise and transparency.

BAM Capital operates under The BAM Companies, which also includes BAM Construction and BAM Management. Not only do they set up real estate syndication deals, they also have their own builders, which makes it easier for them to implement repairs and renovations that increase the property value. [3]

BAM Construction is actually the newest part of The BAM Companies. This branch was added in 2015. It now allows BAM to provide upgrades and updates for features and amenities. BAM Construction has multiple qualified construction and renovation specialists on staff. Simply put, they will work with you from start to finish. [3]

They Have Their Own Property Management Teams

It’s safe to say most investors do not have the time to learn all of the skills involved in purchasing and managing a real estate investment property, especially something as large as a multifamily property like an apartment building.

Thanks to real estate syndicators like BAM Capital, you do not have to go through all of that. BAM Management is The BAM Companies’ very own property management company, which ensures that everything is handled perfectly.

BAM Management specializes in the acquisition and management of multifamily apartment communities. They have an attentive and experienced staff, from their front desk to their maintenance teams.

BAM Management takes pride in the fact that they only manage communities that they are proud of. In fact, even members of the staff choose to live at these locations due to the amenities and value for their money.

Why Smart Money Chooses BAM Capital to Partner with for Apartment Complex Investing

Work with BAM Capital if you want to invest in multifamily apartment complexes without the headache of running them yourself. Real estate syndications are the perfect source of passive income for accredited investors and HNWIs.

BAM Capital is an Indianapolis-based syndicator with a strong Midwest focus that will work with you every step of the way. BAM Capital’s award-winning multifamily investment strategy helps accredited investors grow their wealth through syndication.

Thanks to its vertical integration and local expertise, BAM Capital has unmatched knowledge and experience when it comes to multifamily syndication. They can even use a strategy that creates forced appreciation for their investors.

BAM Capital’s consistent track record speaks for itself. Right now it has $700 million + AUM and 5,000 + units. Work with BAM Capital and they will negotiate the purchasing and financing of high quality multifamily properties on your behalf. [3]

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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