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Ultimate Guide To Growing a Real Estate Portfolio
With Multifamily Apartment Complex Investing (Passive Income Play)

Table of Contents

There are many ways to get into the world of real estate investing. Investors can try commercial real estate, residential real estate, house flipping, purchasing lots, and participating in real estate syndication deals.

In order to make better decisions as you expand your investment portfolio, you need to become familiar with the many different investment vehicles available in the real estate industry. Today we will be focusing on multifamily real estate investing: its benefits as well as its challenges.

Done properly, multifamily real estate investing can change an investor’s life. Buying multifamily rental properties is no small feat, however, and it is important to know exactly what you are getting into. Let’s take a closer look.

Achieving Passive Income In Real Estate - The Holy Grail

There are several ways to achieve passive income through real estate investments, including:
  1. Renting out properties: This is the most common way to generate “passive income” through real estate. We use the air quotes, because if you’reyoure still cleaning out rentals on your own, this is not really passive. By owning one or more rental properties, you can collect regular rental income from tenants.
    1. AirBNB,VRBO and other over night rentals. This requires many different facets.
      1. House keepers and cleaners to handle the cleanup.
      2. Outside maintenance
      3. Good marketing to keep the bookings happening.
  2. REITs: Real Estate Investment Trusts (REITs) allow investors to invest in a diversified portfolio of properties without having to own or manage them directly. This can be a less hands-on way to invest in real estate and generate passive income.This is a much more passive income avenue than AirBNB.
  3. Real estate notes: Buying and holding mortgages or trust deeds can be a way to generate passive income through real estate. As the borrower pays off the loan, the investor receives regular payments of interest and principal.
  4. Land development: Have lots of cash? Have aspirations of creating your own subdivision? Get your pocket book and your rolodex of contacts. Creating subdivisions with all their infrastructure is a daunting task, but for those savvy enough to pull it off, it’sits a huge potential win.

It is important to note that passive income in real estate investments can also come with risks and it is important to do your own research and consult with a financial advisor before making any investment decisions.

What is a Multifamily Property?

A multifamily property is any residential property that has more than one housing unit. Examples include duplexes, triplexes, fourplexes, apartment complexes, and condominiums. [1]

Unlike a single family home, a multifamily real estate investment is able to support more than one family. For investors, this means multifamily properties are able to generate more income simply because there are more tenants.

Some investors choose to live in one of the units of their multifamily property, making it even more versatile than other real estate investments.

Technically speaking, multifamily properties with more than four units are considered commercial real estate properties while those that have fewer than four units are considered residential. [1]

Benefits of Investing in Multifamily Real Estate

There are many reasons to consider multifamily real estate investing if you are serious about diversifying your investment portfolio.

For starters, these properties are known for their strong cash flow. In the world of real estate investing, cash flow is the name of the game. Multifamily properties like apartment complexes are built for the purpose of generating cash flow. The more tenants you have, the more monthly income you generate. [1]

Multifamily homes generate rental income, and unlike single family properties, the cash flow is not interrupted by vacancies. Multifamily real estate investors can still enjoy a solid cash flow even if one or two units become vacant. On the other hand, single family homes simply stop producing income when the tenants move out.

This represents another advantage of owning multifamily real estate. Investors that own an apartment complex face reduced risk. Even if a unit suddenly requires repairs, other units can pick up the slack while it is going through that. This can be a very powerful asset for a beginning investor.

Diversity Your Real Estate Portfolio With Apartment Complex Syndication

Simply owning real estate makes your portfolio more diverse, which allows you to earn a profit even when other investments are tanking. Unlike stocks that are highly volatile, real estate properties are much less so—especially multifamily real estate properties since people always need a place to live.

Multifamily real estate investing is also appealing to investors because it allows them to scale their investment portfolio very quickly. This means scalability is one of the benefits of investing in multifamily properties. [2]

Finally, multifamily real estate properties are also known for their tax benefits. These properties are often highly tax advantaged.** make sure to speak to your accountant or CPA before making any investments based on potential tax advantages. 

A lot of investors use a mortgage to finance a property. They then take a deduction for mortgage interest paid during that fiscal year. This tends to be higher in the first years of ownership as the loan begins to amortize. [2]

Multifamily real estate can be depreciated over a 27.5-year period. It can offset a significant portion of the rental income collected annually even if the property technically appreciates in value.

The Challenges of Multifamily Real Estate Investing On Your Own

No investment is perfect, and that applies even to multifamily properties. In fact, there are many challenges investors may face when going for this type of investment vehicle. You should know about these challenges so you can prepare for them in advance.

The first and most obvious downside of multifamily real estate investing is the high barrier to entry. The cost of a multifamily property is what prevents most real estate investors from buying duplexes, triplexes, and apartment complexes.

The cost will depend on where you are planning to invest, but generally speaking, these properties are very expensive. Even a two-unit apartment can cost over a million dollars, especially if it is in New York, Boston, Portland, or San Francisco. [2]

A lot of regular investors simply do not have the ability to get over this financial hurdle. Coming up with the money is no easy feat for any average investor. But even accredited investors who have a high annual income and net worth may think twice about purchasing large multifamily properties all on their own.

Another potential downside is the competition. Many investors are competing for the same multifamily properties. This only drives the prices even higher. Multifamily properties tend to attract the attention of more experienced investors, particularly accredited investors.

While single family homes are generally more affordable, they do not have the same level of cash flow.

But perhaps the biggest drawback of investing in a multifamily residential rental property is management intensity. Property management is no simple task. If you do not have experience with being a landlord or managing a property, this will be extremely difficult for you. The bigger the multifamily property, the more demanding it is. [2]

Multifamily Property Management

Multifamily property management is intensive. There are multiple units to manage, which means plenty of tenants to deal with, plenty of emergencies to handle, and plenty of problems to solve. The cost of repairs and building maintenance will also be higher.

An inexperienced investor may feel overwhelmed by these added responsibilities. Multifamily real estate investing requires a lot of time and attention.

Investors can take advantage of the fact that property management can be outsourced. You may hire a third party property management company to handle everything related to the apartment building. While hiring professionals will cost you some money, the cash flow from the multifamily property is usually strong enough to justify the added expense.

Additionally, there is an alternative method of investing in multifamily properties that will allow you to enjoy all the benefits without the same amount of drawbacks. Multifamily syndication solves a lot of these problems, including the large barrier to entry and the demanding property management requirements.

Why BAM Capital is the Best Choice for Accredited Investors Looking For Passive Income via Multifamily Syndication

While multifamily real estate investing has clear advantages, it also has significant drawbacks and challenges that you need to take into account. Aside from looking into specific details such as net operating income (NOI), you also have to think about whether or not you want to play the role of landlord.

If being a landlord and managing hundreds of tenants does not sound appealing, the perfect alternative would be real estate syndication.

A real estate syndication deal is when multiple investors pool their resources together and purchase a single real estate property under a deal that is created by a syndicator. A syndicator, also known as the general sponsor, locates the investment property, coordinates the transaction, and looks for investors who can provide most of the capital needed. [3]

Depending on the deal structure, the investors earn a share of the monthly cash flow and a percentage of the equity upon resale. Since the syndicator also acts as the property manager, this is a completely passive investment for investors. They do not have to handle tenant concerns, emergencies, or renovations.

While syndication deals can be done with just about any type of real estate property, multifamily syndication is the most popular because of all the benefits listed above. With multifamily syndication, investors get to enjoy all of the benefits of multifamily real estate investing, without the usual headaches associated with it.

Syndication deals allow investors to participate in larger real estate deals that they normally wouldn’t be able to. Even accredited investors with a high net worth can benefit from this safer approach to multifamily investing.

If you are an accredited investor who is interested in multifamily syndication, work with BAM Capital. BAM Capital is known for its solid track record and ability to create forced appreciation while mitigating investor risk. BAM Capital’s award-winning multifamily investment strategy allows it to target a consistent monthly cash flow.

This Indianapolis-based real estate syndicator has a strong Midwest focus, prioritizing multifamily properties that are class A, A-, and B++, specifically those with proven upside potential and in-place cash flow. [4]

BAM Capital is ideal for accredited investors who want a “done for you” model because the company handles everything from purchasing to managing high quality multifamily real estate properties. Other companies hire third party property managers, but BAM Capital handles it themselves, making sure that the properties are profitable for investors. [4]

BAM Capital can cover all steps of the investment life cycle thanks to its vertical integration. In fact, BAM Capital now has over $700 million AUM and 5,000+ units, making it one of the most reliable syndicators for accredited investors.

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.

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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